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Blog: Join us and steer clear of the latest issues contractors face with HMRC

November 24, 2014

Many contractors may have missed the new “false self-employment” legislation that came into play at the beginning of this tax year. The new rules resulted from a HMRC consultation first published just before Christmas and were announced on 27 March for implementation just a few days later on 6 April 2014.

This whirlwind introduction (a deliberate anti-avoidance ploy by HMRC) was despite the fact that the effect of the rules is to shift an estimated quarter of a million workers, mostly in the construction industry, from self-employment onto PAYE.

The new rules apply to any industry where HMRC considers self-employment is abused.

The new legislation revolves around a simple concept – self-employment in certain circumstances will be determined by a single, stricter statutory test. Despite this, however, the finer details and intricacies of the rules are complicated in practice, drawing heavy criticism from industry bodies and professional advisers.

Confusingly, the new legislation applies only for the purposes of tax and National Insurance, and therefore subcontractors may find themselves in the worst of all worlds – being taxed as an employee but without any employment protection. 

Worse still, the legislation only applies in certain circumstances, so subcontractors may find that they switch employment status from contract to contract. The legislation takes precedence over the CIS scheme, so both will need to operate in tandem for some subcontractors, and tax returns will become more onerous.

To stay away from this HMRC issue cropping up through your contract, it’s critical you pick a reputable Umbrella Payroll company who understand all the latest legislation to ensure you get paid correctly and on time. 

In light of the recent Channel4 Disptaches show we’d like to say we hope the investigation doesn’t stain the reputation of our umbrella payroll industry to businesses and the general public.

Reputable and trustworthy umbrella companies, such as Carrington Umbrella adhere to employment law which includes minimum wage legislation and doesn’t use complicated processes in working out expenses or salary sacrifice methods.

If you’d like further information on the latest contractor legislation for contractors please contact one of our experts on 0203 713 4530.

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