The Truth Behind the Bollocks
Anyone who says you can’t use subbies long-term and keep HMRC happy is a liar
Construction is the only industry in the UK where the self-employed are subject to having tax deducted at source.
CIS was brought in during the 1970s to stop the large amounts of tax evasion. And for a period, it worked.
That’s until organised crime groups in the 90s began forging the vouchers (to the tune of an estimated £50million per year).
Something had to change, so CIS cards were introduced.
But that created a new problem.
CIS cards were being treated as automatic indicators of self-employment, and HMRC became worried that construction firms were not correctly classifying their workforce as employed or self-employed.
They began opening ‘status enquiries’ into firms they believed were disguising employees as subcontractors.
That’s when payroll companies began offering contractors a way to reduce exposure to HMRC. They would sit between contractors and their subcontractors, reducing the risk.
The popularity of this solution has been on a steep trajectory since the early noughties. But much of this growth has been fuelled by scare tactics – myths, mistruths and blatant lies to frighten firms into thinking the threat of HMRC is greater than it is.
This has led to contractors using payroll companies because they believe they have no choice. But they do have a choice. We’re tired of the bullshit, so we’re calling it out and offering contractors an alternative solution.
Bollocks or No Bollocks?
History lesson over – let’s get to the facts. Our bet is you’ve probably been told all kinds of bullshit to make you think you are at risk of an HMRC
enquiry. In truth, you probably aren’t at as much risk as you think, so we thought we’d help you understand what’s true and what is simply a load of
Truth
It’s your responsibility to decide if a subcontractor is employed or self-employed
It’s up to contractors to make the call on whether subcontractors are self-employed or not – the responsibility falls to you, not your subbies.
Bollocks
You can’t work with subcontractors for longer than 13 weeks
It’s how you work with your subcontractors that determines whether they should be employed or self-employed, not how long. If a payroll company can pay subcontractors long-term and keep HMRC happy, so can you. You just need to know how (and we can show you).
Truth
You must be able to demonstrate that subcontractors are a business in their own right
It doesn’t matter how long you work with subcontractors or whether they raise invoices or not. It’s the working relationship that determines self-employment, so you need to prove there is a good business reason for your subbies being self-employed rather than employed. The good news is, we can help you with this.
Bollocks
Your subcontractors can’t drive your vans or wear your uniform
Provided there is a legitimate business reason why you work with your subcontractors the way you do, you can work with them however you want. And we can help you prove you have a legitimate reason.
Truth
You are responsible for insuring subbies
If you work with labour-only subcontractors, you must have Employer’s Liability Insurance. You should also check the cover provided by your Public Liability and Professional Indemnity Insurance. Even if subcontractors have their own insurance, you’ll want peace of mind that you’re covered.
Bollocks
IR35 means you can’t use subcontractors
IR35 is an anti-tax avoidance legislation used to combat subcontractors who disguise themselves as limited companies but are really masked employees. If your subcontractors are sole traders, IR35 does not apply.
Truth
You can use subcontractors long term and keep HMRC happy
You can absolutely use your labour-only subcontractors long term (without using a payroll/umbrella company) and still keep HMRC happy – you just need to be clear about the way you work with them. This means having a water-tight contract that accurately reflects your working relationship (we can take care of that part for you).
Doing it the HardHats way
If you don’t want to employ your subcontractors, but you want to keep hold of your payroll, then HardHats has the solution.
And it’s really simple.
We create a bespoke contract that outlines how you work with subbies and why you work that way. Should HMRC ever question the working relationship between you and your subbies, you can prove that you have a legitimate business reason for working the way you do.
Grab your FREE copy of our book
“How To Use Subcontractors Long-Term & Keep HMRC Happy – Without Using A Payroll Company”
*we'll even pay the postage!
Grab your FREE copy of our book
*we'll even pay the postage!