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Client deducted CIS by "third party" under common ownership

Client deducted CIS by "third party" under...

My client is a skilled engineer registered for CIS as a subcontractor.  He has been working through an employment agency and sought out a 3rd party payroll company (like Sterling CIS but not them! ) to manage his payments as he wished to preserve his self employed status.  Contract has been more than 12 weeks and it turns out that the so called 3rd party he was advised to use by the agency is actually owned by the same directors.  It's a separate legal entity at Companies House but is under common ownership.  This doesn't sound right at all but are there any issues for him or do all problems lie with the agency who are surely in the firing line to be deemed employers?  If they are able to do this legally why to the likes of Hudsons and Sterling have so many clients?  My client is worried and I'm not reassuring him as I agree that it looks like he's employed direct.

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14th Jun 2012 09:33

I'm confused!

Why is it necessary for your client to do anything at all, in order to preserve his self employed status?

Has he been informed that he will only be given work if he operates through a limited company, or a specialist 3rd party company? I find that some of our clients are being put under pressure to incorporate.

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14th Jun 2012 12:30

They're working through an agency but the agency have been paying him through another company but haven't disclosed the fact that they own it.  Surely this is classic NI avoidance?  If it isn't why do 3rd party payroll companies exist at all, eg Hudsons, Sterling etc.  The guy isn't incorporated and is under no pressure to incorporate.

 

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14th Jun 2012 12:59

I am still confused!

"He has been working through an employment agency and sought out a 3rd party payroll company (like Sterling CIS but not them! ) to manage his payments as he wished to preserve his self employed status. """"

If he was under no obligation to incorporate, then why did he 'seek out' a 3rd party payroll company? I am still confused why he did it.

 

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14th Jun 2012 14:22

I was of the impression that all large employment agencies (construction) used 3rd party payroll companies as they didn't want an investigation which would result in them having to pay people under PAYE as opposed to CIS and all that would bring.  If the agency own the supposed 3rd party payroll company doesn't this invalidate the protection a 3rd party gives someone.  Surely HMRC could challenge if they've been in a role for a few months and say that they should be paid under PAYE.  I know this could happen to the payroll company whoever owns them as it's the contractual terms that make a difference but I'm worried that the disguised set up makes him more vulnerable to challenge as he has worked for many months.

 

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