Contractors’ employment status called into question

A recent Supreme Court ruling could have an effect on the PAYE status of as many as one million UK workers, including contractor accountants.

The Supreme Court was deliberating over whether car valeters were contractors or working as employees for Autoclenz. The company claimed that the valeters were not employees because there was a substitution clause in their contract.

However, the clause was not a true reflection on the employment status of the workers’, according to the judges. Furthermore, tribunals should consider the expectations of both parties as well as their bargaining power when deciding whether workers have a choice when it comes to signing a contract.

MacIntyre Hudson claims the ruling has rocked the foundations of employment status. Employment tax director, Alastair Kendrick, explained said a lot of businesses use substitution clauses so that they don’t have to pay PAYE and the Revenue has difficulties proving that somebody is in fact an employee.

As many as one million workers could be affected by this ruling, a lot of them being construction workers, he continued. A lot of employers will also be affected and will now need to pay PAYE instead of schedule D tax. HMRC is likely to start knocking on companies’ doors and asking them to pay retrospective taxes for the last six years.

The construction industry has suffered badly since the start of the recession and if employers find themselves owing vast sums of money to the Revenue, they could be forced to close.

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