You may have been one of the businesses that received a letter in November 2017 from HMRC inviting you to check the employment status of your subcontractors. If you were, what action have you taken?
Have you gone to www.gov.uk and run your subcontractors through the HMRC “check employment status for tax (CEST) online tool and saved the results should they be requested?
If you have run your contractors through CEST and perhaps come up with a result that you might not have expected, have you contacted your advisor to double check that you don’t have a problem lurking?
Have you contacted your advisor to review the employment status of your subcontractors based on the actual working arrangements you have in place?
Have you made sure that you have a contract in place with your subcontractors which clearly sets out the agreed working practices and the employment status?
Have you considered, for each individual subcontractor, the three main indicators of employment:
- Is personal service required or would a substitute with the relevant skills and experience be accepted to carry out the work?
- Is there Control as to the manner in which the work is undertaken?
- Is there a mutual obligation for you to offer further work and if offered, for the subcontractor to accept it?
If you have reviewed individuals and found that they should be employed, have you put them on the books and put a contract of employment in place?
If you have done any of the above, and I’m sure you will have, you are ahead of the game and ready for the next HMRC letter that is expected to arrive asking what actions you have taken and what the results were.
If you still have this an action point on your list of things to do, I would suggest that it is moved to the top of the list. This is not something that should be overlooked as the penalties for those who have not taken action could be steep and they are avoidable.
I have visited a number of clients to discuss this area and have found that there really have not been any problems for those businesses. There might not have been contracts in place in all cases, but this is being addressed by those businesses and will certainly help should HMRC decide to visit.
I must stress that the contract must always be a true reflection of the actual working practices. Getting hold of a general contract which says the right things but which are not reflected in reality will not get you over the line.
If you have not taken action yet, please contact me and I will be happy to visit you to discuss what you should do. Yes, there will be a cost involved for this review, but nothing like the cost of should you be one of those businesses that
Please email or call me on 01376 326266 if you would like to discuss the employment status of your subcontractors.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.