Don’t bury your head in the sand
We’ve shown opposite that for as little as £78 a week, you could protect yourself from a £43,680 liability.
We’ll give you expert advice on how a HMRC legal challenge could impact financially on your business.
If your self-employed workforce is reclassified as PAYE then the implications for you on Employer’s National Insurance payments alone could be severe.
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Produced in partnershi[p with Construction News this white paper provides all the practical advice you need to successfully withstand the scrutiny of an HMRC employment status investigation, avoid unnecessary liability costs and enjoy the sense of security that comes with the knowledge of full compliance.
For example, in terms of employer’s National Insurance alone, here is an approximate example of the liabilities you would have to pay:
A company with a weekly workforce of10 self-employed workers on £700 per week the liability would be around £43,680 per year. If that company lost at tribunal and had to make the National Insurance liability payments you would be looking at the following costs:
- If you therefore had 10 subcontractors and HMRC went back 6 years the liability would be £262k.
- If you have 30 subcontractors and HMRC went back 6 years the liability would be £786k.
This doesn’t include HMRC’s penalty regime and the interest they would be looking to charge which can easily add on a further 35%.
Reclassification of employee costs
There is an additional risk of a firm’s subcontractors being reclassified as employees. If HMRC successfully argues that this should happen, you could take a huge financial hit. Employers currently have to pay HMRC national insurance contributions equal to 13.8% of an employee’s salary unless they are on £156 or less per week or, where they are under 21 or an apprentice under 25, less than £827 a week.
For example, five eligible subcontractors on £400 a week each, who are found to be employees at a tax tribunal, would suddenly mean a firm owing £276 per week in national insurance contributions. This is more than £14,000 per year
This payment claim could be backdated for six years, if it is ruled that the workers should have been classified as employees for that long – meaning a bill in excess of £86,000. Interest and penalties could be added. At this stage many employers would deem it prudent to offer these workers employment contracts to ensure they were given the full range of rights they would be entitled to if an employment tribunal followed the precedent established by the tax tribunal.This would mean a further administrative burden as well as the financial costs of offering sick pay, annual leave, maternity/paternity pay and more. There is also now the right to request flexible working and the roll-out of auto-enrolment pensions to consider.