FROM: JOHN SIMPSON, CHAIRMAN, THE WHITE LIGHT GROUP

You will no doubt be aware that the Inland Revenue is still forging ahead with its regulatory documentation with regard to sub contractors both in the construction industry and throughout the self employed world.

The PSA (Production Services Association) has addressed this problem in its April 1999 Backstage News and again in 2002. We are a sponsor member and I am assuming that you are an individual member. If not you should be!

The Health and Safety Executive considers that a self employed person is someone who is responsible for the payment of his or her own income tax and national insurance contributions and that he or she has a fully paid up certificate of public liability insurance. The Inland Revenue also considers that self employed persons must be allowed the freedom to sub-contract anyone else to do the job on their behalf. Self employed persons must be in a position to provide their own tools and be able to work without supervision. This essentially means that during their period of work hours they are responsible to the contracting party to get the job done within the hours specified but their own organisation and management of their hours is by themselves. If these persons employ a sub contractor as part of the job or to replace themselves then they undertake the obligation of an employer with all the problems of tax and national insurance etc. Personal protective equipment must be provided by the self employed person which ranges from safety footwear through to masks and harnesses as well as first aid.

What does all this mean and how will it affect your future relationship with us? There is no doubt that all of this has caused concern throughout our industry and not least of all the relationships between us. However the Inland Revenue is determined to make sure that every individual pays the appropriate amount of tax and as employers I am afraid we are in the firing line for providing the appropriate documentation. We are, in essence, a collector of taxes on behalf of the Inland Revenue. In the event that we do not provide the appropriate information the onus of the total payment of tax and national insurance falls back on us. All of these points have been rumbling on for years but it is evident that the Inland Revenue Collectors both by inspection and targeting are determined once and for all to regularise the whole position of the self employed, no matter in which industry they work.

What we neeed:
1. A written acceptance of our written order for you to complete the works specified by our company. With your acceptance acknowledgement you must provide a copy of a Certificate of Public Liability outlining its contents, the total or maximum liability under the insurance together with a certification that the public liability insurance premium is fully paid up at the time you intend to undertake the work.

2. That you accept the conditions of work and risk assessment that we outline to you.

3. You accept the payment proposed and the method of documentation. This will mean in essence that we need to receive a professionally produced numbered invoice which will have to include the following:

(a) Your full name / Company trading name
(b) Your address / Company address
(c) Your National Insurance Number
(d) Your Schedule D No. now known as U.I.D No. (Unique Tax Identification No.)
(e) VAT Number if appropriate
(f) Your White Light Sub-Contractor Number

Unless these conditions of documentation and information are met we unfortunately will have to deduct PAYE deductions together with National Insurance deductions. We then have to supply that information to our own tax office on a regular basis. If this happens you effectively become an employee of our company with all of the problems that it brings. We will have to charge a further 12% to the contract for the Employers National Insurance Contribution. We will also have to determine your hours, breaks and conditions. Although you could argue that the tax on a straightline basis at 23% would contribute towards your tax bill at the end of the year you would not be able to claim back the further 10% National Insurance element of the employed person since your self employed status also has a different group of contributions. You cannot claim your genuine expenses under PAYE. You would therefore be losing out quite significantly.

We are no more anxious than I am sure you are, to get involved in the PAYE route and it is in all of our interest to get the documentation straight to enable all of us to present our accounts to the Inland Revenue in a proper fashion without the fear of financial retribution.

If we can help in any way with supporting your self employed status or the documentation please do not hesitate to contact us.