Employing subcontractors an alternative avenue?

[mrmoose]

As people have discovered to there cost there is very grey area when it comes to employing subbys. As I am considering using them a lot more to grow my business, I am interested if anyone else has used or heard of this approach.
I found this company called EEBS and they act as an intermediary between contractors and subcontractors. And this is there guarantee for contractors:
If you were to face either an HMRC status investigation or an employment tribunal for the tradesmen that we supply, we will manage the entire process for you, and provide legal support. If we were to lose the case (and to date we have never lost a case) we would pay all the associated costs.
I am interested on anyone's view to this type of approach and any pitfalls experienced. This is there websitehttp://eebs.co.uk/solutions/cis-payroll-model/

 

[tomatwark]

Having used subbies in the past, the biggest problem is not the HMRC but finding subbies who can do the job to the standard you can.

 

[mrmoose]

Having used subbies in the past, the biggest problem is not the HMRC but finding subbies who can do the job to the standard you can.

I agree with that :roll: #-o but now I am planning a slightly longer term vision, I like the Idea of not having to worry about employment tribunals and the HMRC also 8) .

 

[RobinBHM]

I have heard about this, I think they've sent me emails in the past. It seems a good idea, I guess it really depends how much money they want for it and whether it makes the arrangement less flexible for you and your subbies.

If you are likely to have the same people every week and paying the same amount each time then HMRC may pick it up. However if the work is sporadic and the guys are likely to come and go, then you wont have a problem paying them under the CIS scheme. There must be many thousands of builders who have a few guys that work for them permanently and are paid CIS -no builder is going to want to have to have anybody PAYE.

 

[Inoffthered]

If you are employing self employed sub contractors under CIS and correctly verify the subbies prior to payment, I think HMRC would have a difficult job challenging their use.
The protection offered by EEbs is illusory. As for a possible claim under an employment tribunal, again I think that if a self employed subbie supplies an invoice (as he must) showing his charge and deduction for tax, I think he would struggle to claim that he was an employee. If this is a concern rotate your subcontractors so no one works for you full time.

 

[finneyb]

rotate your subcontractors so no one works for you full time.

This is the way to go, get together with a few others so that the subbies are fully employed but not by you.
I wouldn't trust EEbs or similar they will be good at the talk but walk away if ever the proverbial hits the fan.

Brian

 

[plug]

I am a carpenter and get paid through www.Hudsoncontract.co.uk, have done for several years now.

 

[Inoffthered]

I am a carpenter and get paid through http://www.Hudsoncontract.co.uk, have done for several years now.

I dont see how using an agent absolves an employer from misapplication of the CIS rules.
I also note that Hudsoncontract states

"It's simple. If HMRC or an employment tribunal successfully challenges the status of the operatives on a Hudson contract, we will provide and pay for the legal team to argue the case. If we lose, we pay the fines, not you."

If HMRC was to challenge an employer, it is not the fine that would be the killer, it is the claim for unpaid employers national insurance. It would be interesting to see if "the fine" that Hudson underwrites actually includes this NIC liability.

Also I am curious about the relationship between the sub contractor and Hudson contracts. Who finds the work, who decides who does it, who takes the financial risk of the contractor going bust.

Also, what do they charge and who pays them?

If you have been paid by Hudson for several years, how is it structured so HMRC cannot claim that you are employed by Hudson , leaving them open to a claim.

 

[beech1948]

The last post above correctly illustrates the issue.

A way around this is to have a standardised contract for use with subbies which includes the necessary paragraphes to say the subbies are not employees, will not be paid as employees and are responsible for HMRC,NI,Tax payments etc.

Its also useful to use the contract to set out the means of dismissal, the quality of the work and the basis of payment eg per job with no right to expenses.

 

[RobinBHM]

The HMRC have a clear set of criteria that should be used as a basis for deciding whether a person is to be paye or cis.

Typicalky, a self employed person, buys materials, quofes for job, can make a profit or loss, has a right of substitution.

Paye is higher tax due to employers ni. But the legislation and costs involved with employing staff mean in reality almost no building contractors will want employees.

 

[Inoffthered]

The last post above correctly illustrates the issue.

A way around this is to have a standardised contract for use with subbies which includes the necessary paragraphes to say the subbies are not employees, will not be paid as employees and are responsible for HMRC,NI,Tax payments etc.

Its also useful to use the contract to set out the means of dismissal, the quality of the work and the basis of payment eg per job with no right to expenses.

I tend to agree. Having looked at the Hudsoncontract web site it seems that they charge £16 per operative per week i.e. £832 per year for providing an almost meaningless guarantee and acting as middleman between subbie and contractor and for dealing with the CIS verification process and monthly CIS returns (from info provided by the contractor). Wish I'd thought of it .

 

[backinthesaddle]

Be careful that you don't fall foul of IR35 and deemed employment issues. Plenty of stuff online about this but the govt have tightened up rules around using sub-contractors with ltd companies.