False self employment in construction: taxation of workers

Summary of responses and next steps

HMRC and HM Treasury have published a summary of responses to their consultation paper on false self employment in the construction industry. The paper also suggests their thinking on what might happen next and it seems that although Government has listened to concerns, a legislative approach is likely:

‘the Government is committed to tackling this issue and given that there is broad recognition of the problem of false self-employment, continuing with the status quo or legislating the current case law tests are not viable options.’

More work will be done to refine and develop the deeming test outlined in the consultation and the Tax Faculty expects to participate in further meetings to provide further input and feedback.

We are pleased to note that change will not be rushed through. The current paper states that the Government recognises the effect that the economic downturn has had on the construction industry and intends that change will only be made when the industry is in a stronger position.

These proposals followed announcements made in the 2008 Pre-Budget Report and Budget 2009. The Government launched a consultation in July 2009 on its suggested legislative solution to address the perceived problem of false self-employment in the construction industry. The Tax Faculty responded to this last October as TAXREP 54/09.

The consultation outlined a proposal to introduce legislation to deem workers to be in receipt of employment income unless one of three criteria is met:

1. Provision of plant and equipment – that a person provides the plant and equipment required for the job they have been engaged to carry out. This will exclude the tools of the trade which it is normal and traditional in the industry for individuals to provide to do their job;
2. Provision of all materials – that a person provides all materials required to complete a job; or
3. Provision of other workers – that a person provides other workers to carry out operations under the contract and is responsible for paying them.