They Thought Their Umbrella Company Had Them Covered.
Like many construction businesses, this traffic management company had been using an umbrella payroll provider to manage payments to its subcontractors.
How HardHats helped a North West groundworks contractor successfully navigate an HMRC employment status enquiry.
Client: Groundworks Contractor, North West
Sector: Construction & Groundworks
HardHats Client Since: June 2022
Outcome: HMRC closed the enquiry without pursuing the contractor further.
The Challenge: An HMRC Letter Nobody Wants to Receive
When a North West groundworks contractor joined HardHats in June 2022, they had concerns about their working relationships with subcontractors and wanted to make sure their business was properly protected.
We helped put the right contractual arrangements in place, reflecting how the business actually operated.
Then, in March 2023, the dreaded letter arrived.
HMRC had opened an enquiry into the contractor’s subcontractor arrangements for the 2021/22 tax year, before HardHats had even been appointed.
The problem? There were no formal subcontractor contracts in place during the period under investigation.
With a potential liability estimated at £265,000 per year, this was far more than a paperwork problem.
What We Did: We Didn’t Back Down
HMRC questioned whether the subcontractors were genuinely self-employed and whether contracts introduced in June 2022 reflected earlier working arrangements.
HardHats argued that the contracts simply documented practices already in place. HMRC wasn’t convinced.
Three increasingly challenging rounds of questioning followed, examining:
- Control: Why did subcontractors work in gangs? Who was in charge?
- Personal Service: Could subcontractors provide substitutes, and had they?
- Business Independence: Why were vehicles and training provided?
HardHats managed every response, providing documentation and defending the reality of the working relationships.
HMRC even questioned subcontractors directly to cross-check their answers against the company’s account.
Further questions followed, but we stood our ground and supported the contractor throughout.
The Result: Case Closed.
After multiple rounds of questioning, scrutiny of the working relationships and direct enquiries with subcontractors, HMRC issued its conclusion.
It would not be pursuing the contractor further in this instance.
The business could move forward without the proposed liability being pursued through this enquiry.
This wasn’t about finding a clever loophole. It was about understanding the reality of the working relationships, presenting the evidence and having the expertise to defend the contractor’s position.
The HardHats Difference
A payroll provider can process payments. But what happens when HMRC starts asking difficult questions about the people you’re paying?
That’s where proper employment status expertise matters.
Had the contractor simply moved to an umbrella payroll provider, that wouldn’t necessarily have addressed the historical working arrangements under investigation.
HardHats provided something beyond payment processing: specialist support when the business needed it most.
Because getting your subbies paid is one thing. Having someone in your corner when HMRC comes knocking is another.
The Accountant Walked Away. We Didn’t.
How HardHats helped a construction contractor reduce a potential £110,000 HMRC liability to under £3,500.
£265,000 at Stake. HMRC Came Knocking. We Had Their Back.
How HardHats helped a North West groundworks contractor successfully navigate an HMRC employment status enquiry.