HM Treasury has published the responses to its consultation on introducing PAYE for labour-only subcontractors – but despite receiving a large number of objections, it is planning to proceed with its plans.
The consultation received 117 responses, with a large number feeling that the introduction of the ‘deeming test’ (to establish whether a labour-only subcontractor should be on PAYE) would bring about an additional administrative burden.
In response to the concerns, the Treasury said: “The Government has listened to stakeholder concerns in relation to the solution proposed, but it considers that a legislative approach is worth pursuing.”
The director of one subcontractor payments service provider said: “For workers who work for a company that complies, they will pay tax and NI on income like an employee, but won't gain any employment rights or job security.
“Other workers will simply go over to the black market and be paid gross. So the Treasury will lose out and the companies that comply will lose contracts on cost because companies are paying for labour on the black market.”
The Treasury said its deeming test would be developed with input from stakeholders, before becoming the “legislative solution that meets the Government’s aims”.
The test would be “well-targeted, effective and allow the industry to retain a flexible labour supply”.
It added: “The Government recognises the effect that the economic downturn has had on the construction industry. It is the intention that the test developed as a result of this further work with stakeholders will take effect when the industry is in a stronger position.”