Following the introduction of the legislation aimed at ending what the government terms “false self-employment”, Bar2 have adapted to these guidelines by introducing a method of self-employment alongside CIS called SEP (Self-Employed PAYE). Our experienced team have attended seminars and meetings in regard to the latest legislation, and in collaboration with tax specialists offering professional advice, we have established this alternative method of engaging with our contractors.
What is SEP?
In basic terms, SEP allows us to categorise workers as self-employed for employment purposes, but as PAYE for tax purposes. If the individual is subject to a high level of supervision, they must be taxed as if they were an employee (under the rules of PAYE), however if there is a lack of control as to the manner in which they provide their services, then expenses are allowable.
Generally, SEP is aimed at a minority of contractors who are on rates that fall close to the National Living Wage and cannot be paid through an Umbrella Company. Although they can claim expenses through a Bar2 company on a weekly basis, the fact that this could bring the taxable earnings below the national living wage is not a concern as they are not employees or workers for the purposes of employment law - and therefore the national living wage does not apply.
In order to be categorised as self-employed and taxed under the rules of CIS, it has to be proven that there is no Supervision, Direction and Control [SDC] as to the manner in which the services are provided. For skilled trades people, it is normal for there to be an absence of SDC as to the manner in which they do their work, however for unskilled and semi-skilled workers this is rare. If these workers provide services independently of recruitment and intermediary companies, it is possible that they may wish to retain their self-employed status. For these people, we will automatically apply the rules of PAYE to their pay.
The current minimum hourly rate we require to supply workers under SEP is £9.88 per hour. This is to ensure that their pay does not fall below the national living wage for over 25’s, in the event that there are no expenses claimable.