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Chancellor pushes ahead with changes to self-employment rules

In today’s Budget, the government confirmed it will press ahead with changes to employment legislation to prevent ‘false self-employment’.

Initially announced in the 2013 Autumn Statement and due to come into force next month, the changes mean that workers employed by intermediaries will be treated as employees for tax and national insurance purposes.

“The announcement was particularly targeted at the construction sector. This change is to be introduced from April 2014 and from this date the intermediary would in most cases be required to operate PAYE and National Insurance on payments they make to workers,” said MHA MacIntyre Hudson tax director Alastair Kendrick.

In the original consultation document, the Treasury said: “The measure is aimed at preventing employment intermediaries being used to avoid employment taxes and obligations by disguising employment as self-employment.”

(Read Mr Kendrick’s full reaction and advice for construction companies here)

It added: “In the majority of cases the worker will gain the benefits of being an employee for employment rights purposes”.

Confirmation that the government will go ahead with the implementation of this legislation in April follows a period of consultation when the industry voiced its concern about the speed at which these changes were being enforced.

“Looking at the responses received by HRMC is appears that a significant number of companies within the industry welcomed the proposals. There was concern though if it is realistic for the changes to start in April 2014 with requests for a 12 month deferment,” said Mr Kendrick.

The UK Contractors Group had called for a delay on introduction of measures on tax and self employment till January 2015, to allow its members time to prepare for the changes.

“There will be disappointment in the industry that measures to combat bogus self-employment will come into effect on 5 April,” said UKCG director Stephen Ratcliffe.

“UKCG supported the principle but had asked its introduction was delayed so that costs did not rise on contracts where the price was already fixed. There will also be some frustration that there were no “carrots” to stimulate greener construction.”

In the summary of responses to the consultation, the Treasury said it was concerned that delaying implementation would allow new avoidance schemes to develop.

“Having considered these arguments the government believes delaying implementation would provide the opportunity for new avoidance arrangements to be put in place and therefore implementation will not be delayed.”

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