Proposals to alter the status of workers in the Construction Industry

The Government has published a consultation document with proposals to introduce legislation that will alter substantially the way in which the status, self-employed or employed, of workers in the Construction Industry is determined.

The Government has attempted several times over the past 10 years or so to reduce the number of workers that are in what it calls ‘false self-employment’ in order to improve the yield of PAYE tax and National Insurance from the industry. It is now proposing three criteria and the worker will have to meet at least one of these to be deemed to be self-employed.

The criteria are:

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 for themselves 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.
For workers providing their services through their own Limited Company it is proposed that the new legislation will take precedence over the intermediaries legislation, more commonly known as IR35.

The proposals are a drastic change in the way in which self-employment is determined and only affects the Construction Industry. However if it is seen to be successful in HMRC’s eyes then it is possible that similar legislation might be brought in for all self-employed workers.

The consultation document can be read in full at http://www.hm-treasury.gov.uk/d/consult_falseselfemploymentconstruction_200709.pdf
Comments on the proposals are invited by 12 October 2009.

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