False self-Employment

HMRC unit to investigate false self-employment

QS warns firms to prepare for HMRC self-employment status crackdown

HM Revenue & Customs (HMRC) is launching a specialist unit to investigate firms suspected of falsely classifying their workers as self-employed.  Its aim is to crack down on firms that exploit workers by unfairly classing them as self-employed to avoid paying tax, holiday pay, a Living Wage and a host of other employment rights.  In this blog, our MD, Peter Gillespie, looks at its potential impacts on clients.

The Government has ordered a crackdown on firms which – either knowingly or unwittingly – falsely classify the employment status of staff, particularly agency workers.  Financial Secretary to the Treasury, Jane Ellison MP, recently announced plans to establish a specialist unit within HMRC to investigate companies which opt-out of giving workers employment protections by classifying them as self-employed.  She said that the Government was “committed to taking strong action where companies, to reduce their costs, force their staff down routes which deny them the employment rights and benefits they are entitled to”.

A recent London employment tribunal found that drivers working through the popular car sharing app Uber should be classed as workers, rather than as self-employed. However, the ruling paves the way for more tribunals against employers at which a substantial number of their workforce are classified as self-employed. It has also prompted the launch of the dedicated unit aimed at tackling firms which benefit from incorrect worker classifications.

In the eyes of the law there is a bit of a grey area, which centres on whether or not someone working for a business is under the supervision, direction and control of the employer.  If they are, then classifying them as self-employed could fall foul of the rules.  It is the working practices that are the most important determining factors of genuine self-employment, more so than the engagement. While there is no indication yet of what sanctions may be levelled at firms which get investigated as part of this crackdown, it’s clear that companies which contract workers in this way will be forced to review how much they are paying their staff.

That is why choosing the right recruitment partner can help your business to ensure they are complying with the relevant legislation and avoid a costly legal headache.

This is where QS Recruitment can help.

We have in excess of 100 clients that use our drivers on a weekly basis, which is why we invest heavily in professional legal and accountancy advice to ensure all of the drivers we supply are properly-classified and are engaged in a fashion that protects our clients, workers and ourselves, but still provides a very cost-effective solution.

If businesses are working with an agency supplier that is engaging workers as self-employed, they should review the rationale behind that decision and the legality of doing so.  This practice may result in the business incurring costs that they did not budget for… not to not to mention the reputational damage that being ‘named and shamed’ by HMRC could inflict.

Our advice to any firm which engages drivers is to make sure they are aware of the risks and, if in doubt, to speak to one of our professional recruitment advisers.