KOK TECH NEWS: (IR35) HMRC ‘Disguised Employee’ Construction Tax / Employment Status Test / EU GDPR Tool

Director’s foreword

A heads up for those self-employed and those with small businesses to take appropriate advice and actions. With thanks to FSB for their warnings.

John Okey, Director

Employment status: HMRC construction tax status check

HMRC is asking plumbing and construction companies to use its CEST (Check Employment Status for Tax) tool to check if a sub-contractor should be classes as employed or self-employed for tax purposes.

Companies could face significant bills for unpaid income tax and National Insurance contributions if CEST decides a sub-contractor should be classed as employed and taxed through PAYE.

Read more about this issue at bit.ly/2oiwzwf

Need to know (Issue April – June 2018), FSB – First Voice. Print.

HMRC loses ‘disguised employee’ contractor case

Mark Daniels and his company MDCM, who were appealing HMRC’s decision to pursue him for PAYE and Social Security contributions, has successfully appealed his case against the tax authority.

HMRC was pursuing Mr Daniels under the IR35 tax avoidance legislation brought in by the Labour government in 1999. The law was designed to stop “disguised employment”, where workers had an employee-type relationship with a client but were receiving payments in a different way, such as setting up their own limited company.

Mr Daniels set up his company MDCM, of which he is both Director and employee, to offer construction services in 2004.

HMRC alleged that the nature of Mr Daniel’s work through his company with fit-out and refurbishment specialist Structure Tone Limited (STL) via employment agency Solutions Recruitment Limited (SRL) meant that he was effectively operating as a direct employee. HMRC argued that he should be classed as an employee due to performing specified and exact tasks that were set out for him as night manager; that the contractor would not accept any substitute to replace him in his absence and because neither MDCM nor Mr Daniels incurred any financial risk as part of the arrangement.

However, Mr Daniels said that during his time on site of SRL site he had followed the instructions of his site manager and managed the night shift but was not invited to employee meetings. He also paid his own expenses for food, travel and accommodation and Mr Daniels stated that he did not have a notice period and was not entitled to holiday or sick pay.

Judge Hyde agreed that STL’s unwillingness to accept a replacement and the lack of financial risk did “point to an employment relationship”, but ultimately rejected HMRC’s argument on the basis that Mr Daniels was paid a flat rate per day and with no notice period of employment benefits and was not “treated as an employee”, therefore ruling in Mr Daniel’s favour.

Garner-Purkis, Z (2018, March 28), HMRC loses ‘disguised employee’ contractor case, retrieved from https://bit.ly/2GADtUA

Government replies to Taylor review

The Government has published its response to the Taylor Review of Modern Working Practices. In the ‘good work plan’, it outlines proposals for all workers, including casual and zero-hours workers, to benefit from a range of employment rights on the first day they start work.

It has also launched a consultation on proposals to introduce a new statutory test of employment status. The deadline for responses is 1 June.

Read more about the Government’s response at bit.ly/2EJDB7d

Read more about the consultation at bit.ly/2opG9MQ

Need to know (Issue April – June 2018), FSB – First Voice. Print.

EU launches GDPR online tool for data change

The European Commission has launched an online tool to help smaller business understand and prepare for the General Data Protection Regulation (GDPR), which will replace the Data Protection Act in May. It provides guidance about the information that the GDPR applies to and compliance.

FSB has also launched its own GDPR Campaign Hub to help raise awareness for small businesses and the self-employed at bit.ly/FV-GDPR-hub.

Need to know (Issue April – June 2018), FSB – First Voice. Print.