Tax Professionals and the Construction Industry
Article Date: 15/05/2008
Behind the scenes partnerships operate between agencies and certain companies offering payroll and contractor services, and over the last ten years this has kept employment costs in the construction industry down.
These arrangements have operated under the noses of major contractors, HM Revenue & Customs and the top accountancy practises for over ten years, but few are actually safe and legal. The ‘payroll’ companies purport to ‘employ’ workers, promising to protect the real engager from tax and NI liability and other potential employment costs, but these companies used to promise tax compliance, until HMRC clamped down and outlawed their practises in April 2007. Now the same companies have re-invented themselves as PAYE and CIS umbrella companies although are clearly operating in much the same way.
Tax and other professionals have made their opinions about these companies known, download the following document to learn more. What the Experts Say.
The major accountancy practises support and even sell PAYE umbrella schemes, but anyone with some tax expertise can recognise that the tax and NI savings on expenses which are genuinely tax deductible hardly covers the charges made by an umbrella company.
When a worker agrees to be paid via an umbrella company he signs away his employment rights and the construction unions slam companies which disguise a worker’s employment, but they receive union fees from umbrella companies which deduct union subs from the workers!
Our director, Carolyn Walsh, acted as a consultant for the Treasury on the introduction of the Managed Service Company legislation which effectively outlawed composite companies. In her consultation document, she stated categorically that PAYE umbrellas should only be allowed under HMRC guidance. To date this guidance is still not in the public domain and so anyone can start up a PAYE umbrella company believing that their scheme is compliant, which may not be the case.
Under the same consultation exercise she also put forward the idea of ‘policed’ CIS umbrellas, first and foremost because these companies protect the rights of the genuinely self-employed to work as subcontractors in the industry and says, “a company which takes responsibility for administering payments to the self-employed, helps the industry to cope with the new Construction Industry Scheme. As around two thirds of construction industry contractors are filing paper monthly returns, if these are lost or late the contractor stands to be fined and lose Gross Payment Status, the provision of this type of service cannot be undervalued.”
Direct employment is preferable, but not always possible in this industry. Construction industry contractors have a huge responsibility and can suffer crippling liabilities under new tax laws, they clearly need all the advice they can get.
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