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The false self-employment legislation proposed at the end of 2013 could force all contractors, including limited company contractors, into paying tax and National Insurance Contributions (NICs) via the Pay As You Earn (PAYE) scheme.
It incorporates a new test, laid out in the Finance Bill 2014. If it becomes law, the test will apply to all contractors who are on agency contracts from 6 April 2014.
The test presumes that contractors are employees for the purposes of income tax and NICs, unless it can be proved by the agency that they are not “under the control, direction and supervision” of the client as to the manner in which they provide their services.
The likely impact is that all agencies and organisations in the supply chain will deduct income tax and NICs at source via Pay As You Earn (PAYE) from all limited company and umbrella company contractors.
If enacted, the test will sit alongside existing tests of employment and IR35. In its current form a contractor could be outside IR35 but fail the false self employment test, so still pay tax like an employee, as if they were actually caught by IR35.
The legislation is undergoing a consultation which ends on 4 February 2014.
Background
False Self-Employment legislation - explained
Most contractors should remain outside of the False Self-Employment legislation, which is mainly targeting self-employed sole traders.
Latest news
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False Self-Employment legislation - explained
Most contractors should remain outside of the False Self-Employment legislation, which is mainly targeting self-employed sole traders.
Others | Wednesday, 21 May 2014
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Others | Friday, 14 March 2014
Contractor and recruiter bodies in final attempt to delay false self-employment rules
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Others | Thursday, 13 March 2014
Contractors excluded from proposed False Self-Employment rules by technicality
Limited company and umbrella contractors are excluded from proposed False Self-Employment legislation through a tax technicality, explains Lawspeed.
Others | Thursday, 23 January 2014
HMRC places limited company contractors outside new False Self-Employment Legislation
Limited company contractors are not within the scope of the new False Self-Employment legislation proposals, shows Lawspeed its latest seminar.
Others | Thursday, 23 January 2014