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The government is currently consulting on new legislation to tackle â€˜false self-employmentâ€™, following measures announced in this yearâ€™s Budget by Chancellor Alistair Darling according to Danbro, the specialist accountancy firm for contract and freelance workers.
The consultation outlines the governmentâ€™s proposal for ensuring construction workers, who it considers to be working effectively as employees, are taxed appropriately and In its opinion, the best way to achieve this is through legislation. False self-employment occurs where workers are treated as self-employed for tax and National Insurance purposes, even though the way in which they work on a day-to-day basis indicates an â€˜employment relationshipâ€™.
Mr Darling claimed that, as well as costing money to the exchequer, false self-employment also affected the ability of compliant businesses to be competitive and stopped workers accessing social security benefits to which they were entitled.
It is thought the 300,000 or so labour-only subcontractors will be the main target of the legislation, but anyone else who HM Revenue and Customs considers to be an employee but is not paying the correct tax — whether due to deliberate subterfuge or a genuine error — is also likely to face a bill for the missing tax and a large fine.