Tax & admin · 13 February 2018

HMRC employment status indicator tool launched for construction companies

Construction firms may be encouraged to move workers to a PAYE scheme
An online tool indicating employment status for construction companies that hire and make payments to self-employed workers and sub-contractors, has been introduced by HMRC.

The Check Employment Status for Tax tool (CEST) allows company bosses to check whether a worker should be classed as employed or self-employed, for tax purposes.

According to HMRC, CEST will enable construction business owners, including builders, plumbers and electricians, to move workers from the construction industry scheme (CIS) to a PAYE scheme if necessary.

Under CIS rules, construction companies can deduct money from a subcontractor’s pay and pass it directly to HMRC. The deductions then count towards that subcontractor’s tax and national insurance payments.

Read more:?Vulnerable self-employed urgently require better benefits, training and in-work protection

HMRC hopes that by introducing CEST, construction companies which regularly report CIS payments for the same subcontractors will realise that those subcontractors should actually be employed and, after using the tool, will move them onto PAYE schemes.

Managing director at CIS workplace audit and contract service provider Hudson Contract, Ian Anfield, welcomed the CEST tool but warned construction companies about the financial consequences of failing to understand their tax obligations.

He said: Failing CEST could be absolutely disastrous and a construction company with only a handful of ‘subbies? could be destroyed.

a small error could result in firms finding themselves facing a huge bill for unpaid tax and national insurance contributions. It could also result in CIS subbies being permanently reclassified as employees.


 
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ABOUT THE EXPERT

Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.

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