When HM Revenue & Customs (HMRC) legislation forced composite companies out of business last year, it was seen as a good thing for the construction industry. But that same legislation allowed PAYE umbrella schemes to take up where composites left off. The taxman had these companies in the net and let them off the hook.
A PAYE umbrella scheme pays much of a worker's payment as travel expenses or for meals and tools, but workers become employees of the umbrella company and so normal benefits and expenses rules apply.
When a place of work is not a temporary workplace, a worker's travel and other costs become normal costs payable out of taxed income.
What is not understood is that when payments are treated as expense payments, these do not count towards gross pay for calculating the national minimum wage. Neither is holiday pay.
Clients and principle contractors are responsible for checking compliance in the supply chain, but it is still unclear to what extent they could become liable if workers are found to be improperly employed.
HMRC is actively seeking law breakers and is able to impose fines of up to £5,000 for each offence. When the net closes, the taxman will recoup millions, without having to issue demands and challenging appeals on what constitutes a temporary workplace. But at what cost to an already beleaguered construction industry?
Carolyn Walsh,
Director
CW Construction