For companies that use subcontractors

For companies that use subcontractors

Marble provide companies with certainty over self-employed status.

Self-employed workers

Employment status is a grey area of law whereby a company can spend years building up a business, assets and goodwill only for HMRC to come along and say that the individuals they were paying on a self-employed basis should have in fact been employees. This can saddle the company with significant liabilities which will often be enough to strip the company of its assets and potentially close the business. This wouldn’t be such a problem if the law was clear but there is no legislation which clearly sets out when an individual is self-employed or when they are employed and instead the courts decide cases by looking at case law precedents to see which cases, principles and facts apply to the companies case, this makes it extremely difficult for companies to engage people on a self-employed basis with any certainty and financial security.

Marble can look at how the individuals are engaged to assess whether they should be employees or not. We can offer a contracting payroll service to ensure clients are protected from employment status challenges by HMRC. It is a simple and effective solution to this issue – we look at how they work, we engage and pay the individuals and put contracts in place between our business and the workers. The individuals contractual relationship is then with Marble and so any query on how the individuals are treated is with us rather than with our clients. We are happy to offer this service as we have a great deal of experience in the field of employment status.

Marble is an intermediary and therefore within the scope of the agency legislation (ITEPA 2003 s44) which means that in order for us to pay individuals on a self-employed basis, we must be able to show there is a lack of supervision, direction and control over how the individuals work (health and safety regulations do not impact this). It is important to note with this that you can tell the subcontractors what to do, where and when, just not how to do the work (which is less likely to be an issue if they are skilled and experienced in their trade). As we are bound by the agency legislation, it does not matter whether the individuals work consistently for Marble, without breaks, or working for others as the legislation is specific to control and so you can continue to use the same individuals that you know work hard and provide good workmanship.

Kye and Sarah from Marble also head up Trinity Tax Ltd which specialises in advising and defending companies in relation to HMRC disputes. Trinity Tax can review businesses and identify whether there are any risks regarding employment status and provide as much or as little assistance as required to adequately address employment status. This can simply be providing advice and guidance to defending and indemnifying clients. We pride ourselves on providing open and honest advice about your position and what will work best for your business to ensure that not only is your business compliant but that the advice is commercial and suited to your needs.

Whether you use the services of Marble or Trinity Tax, we can provide certainty and remove the headache that is associated with employment status. It is very straight forward to start using Marble, there are no minimum or maximum numbers nor are you tied into a contract with us for a fixed time so you can use Marble as and when it suits you and stop at any time if you choose.

A closer look at the risk and liabilities

If you engage people on a self-employed basis you run the risk of HMRC or the individuals challenging their employment status. The consequences of this for a business can mean you will have substantial liabilities to pay out and will be required to pay the workers on a PAYE basis going forward which limits the companies flexibility and increases costs and administration considerably. It is worthwhile calculating the potential liabilities to get an idea of the risk.

HMRC Challenge: Most companies do not actually sit down and work out what liability they could actually be facing if they lost an employment status case. This is worth doing because it will often be higher than you would expect.  To give you an idea for every reclassified subcontractor earning £500 per week, the employer’s national insurance would be in excess of a £50 per worker per week and this is excluding, tax geared penalties, interest and a small amount of employees national insurance that would also be payable. It doesn’t sound like a great deal on its own but bear in mind HMRC can go back 6 years and the figure states to change:

  • For 1 Subcontractor who has worked for you for 6 years the bill would be a minimum of £15,000 (plus about £2000 in penalties and interest)
  • If you had an average of 20 Subcontractors, this figure would be closer to £300,000 which would again be subject to penalties and interest.

One example to demonstrate this is the case of JL Windows v HMRC in which the taxpayer had between 12 and 20 subcontractors and HMRC assessed them for £500k. Fortunately in that case Dave Smith (one of the owners of Marble) was able to defend the company at the tax tribunals but it highlights the point.

Employee Claim Risk: If one of your self-employed subcontractors believes they are entitled to employment rights you could find yourself with a court claim (like the much publicised Uber case in 2016 and Pimlico Plumbers). Holiday pay is one example of this and it is the equivalent of 12.07% of whatever you have paid to the worker, so  the potential liability would be £60.35 per week if the subcontractor was paid £500 per week. Hopefully this type of problem wouldn’t arise if you have good working relationships with the individuals but the appeal of a lump sum can be too much for some if they leave on bad terms, especially as it no longer costs them any money to file a claim at the court.

The individuals can seek holiday pay for as far back as they have been working for the company and so if the individuals have been working for the company for a long period of time this can be a lot of money.

If you were to use Marble, it breaks the contractual chain between your business and the individual and so any claim for holiday pay or similar would be against Marble.