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Construction News - CIS

After a whirlwind consultation period from December 2013 to March 2014, the government introduced significant new rules which require agency staff to be taxed as employees - unless the employment agency has evidence that the worker will not be supervised, directed or controlled by anyone.

In essence this has meant that for the last six months, agencies have been required to put these workers on the payroll, deduct National Insurance Contributions and operate PAYE as though they were employees.

It is estimated that around 200,000 workers in the sector have been affected and given the industry’s reliance on agency workers, we wanted to analyse the industry’s awareness of these rules whilst also investigating the impact on labour costs.

We recently conducted the research amongst 600 construction firms of varying size ranging from under 100 employees to over 500 to see where the industry is six months on, and also what might be around the corner when in another six months’ times, further changes will be made.

At this point it will become compulsory for employment agencies to report individuals that are not taxed as employees to HMRC or face financial penalties.

Speaking to senior decision makers, it’s clear from our research that construction firms and employment agencies appear to be still getting to grips with the changes.

Crucially however there are also signs that the costs are being passed on and starting to have an impact on competitiveness.

We believe understanding and adapting to these rules is a critical issue for construction firms and employment agencies and we would urge such businesses to consider the impact of the rules on their organisation.

This survey has revealed that 10 per cent of construction businesses already believe that they have become less competitive as a result of these new laws.

Although the sector is performing strongly, it is vital for the UK economy as a whole that the sector is fully aware of these regulations and deals with them effectively.

Chris Tutton is head of employment, London at Irwin Mitchell LLP


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Construction News - CIS Changes

HMRC introduced new tax regulations in April to tackle what it saw as the exploiting of self-employment for tax purposes when workers are not genuinely self-employed. These changes were particularly targeted at what HMRC perceived as false self-employment in the construction sector.

Risks involved

The “Onshore Employment Intermediaries” legislation defines that workers supplied through an intermediary payroll organisation that are under someone’s “supervision, direction or control” will be treated as employed for tax purposes by HMRC. It is the intermediary that is responsible for deducting tax and National Insurance as if the worker is an employee. 

Some payroll intermediaries have responded to the new regulations by launching schemes requiring the construction businesses and their workers to sign letters or contracts declaring that self-employed contractors are not under “supervision, direction or control”. The intermediary then continues to treat the worker as self-employed.

However, some of these schemes put the construction businesses that use them at risk of hefty tax bills and fines. Any construction company that signs such a letter could leave itself exposed to a big bill for PAYE, NICs and penalties and interest in an HMRC investigation.

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Qatar or not Qatar.. Ijara


"Project Blue, the investment vehicle ultimately owned by the Qatari ruling family, claimed that HMRC was now out of time to pursue Masraf al Rayan, a Qatar-based bank....

"Project Blue had used a type of finance that complied with Islamic law, which forbids lending money for interest. It used an arrangement called Ijara."

"Under an Ijara arrangement a bank or other financial institution buys the asset that the customer wishes to acquire and then leases that asset to him," said Lord Justice Lewison in the judgement.

"The rent is calculated in such a way that the bank will receive a return on its investment. The customer will also have an option to buy the asset. However, it is critical to appreciate that the bank will be the real owner of the asset for the term of the lease, and the customer will not."

Qatar is now a large player when it comes to investments in London. It is a joint owner of the Shard, has a 20% stake in the owner of Heathrow airport and a significant stake in Barclays after helping the bank avoid a government bailout in 2008.

Project Blue said in a statement: "In good faith, Project Blue Ltd paid the full original sum demanded in advance of the First Tier Tribunal hearing in 2013. We welcome the important clarifications provided by the Court of Appeal. Project Blue Ltd has always fully complied with all UK taxation matters and will continue to do so."

Meanwhile :