Pay and Expenses

PAYE

PAYE workers are essentially employed by Bromak as far as the Inland Revenue are concerned; NI and INCOME TAX are deducted at source and they are paid net straight into their bank account. You will receive a P45 when they complete your assignment with us and will receive a P60 at the end of the tax year in the same way that Bromak consultants do.

You are classes as ‘employees’ of Bromak as far as the Inland Revenue are concerned but are still provided on a contract for services to our clients.

PAYE Workers are paid holiday pay however, we accrue holiday for contractors at a rate of 10.17% of the hourly rate for each hour that they work.

Holiday will be retained till such time that the contractor (you) sends a written request for accrued holiday pay to be released

CIS

Candidates employed under the CIS (construction industry scheme) are essentially self employed but when working for a contractor they have 20% tax deducted from source. Contractors can also be deducted 30% whilst the HMRC register their UTR or if they are unable to Verify the percentage of tax a contractor should be paying. Their final tax bill will take into account expenses, tool hire / purchase, travel etc and will be dealt with by either the Payroll Company the contractor is using or by an accountant.

The Inland Revenue have stated that recruitment agencies are not allowed to employ individuals on a self employed basis and cannot therefore pay individuals gross without deductions. A contractor can only be paid by this method if the CIS or UTR number that they hold is in the name of a Limited company.

To be deemed 'self employed' by the Inland Revenue they have to fulfil a number of criteria including the following:

- CONTROL: They have to be under our control and supervision and clearly they are not
- THE RIGHT TO APPOINT A SUBSTITUTE: They should have the right to be able to provide a substitute in their place - clearly they cannot do this as it is this individual that we are providing the contract to.
- FINANCIAL RISK: They must work to a fixed price and potentially make a loss on the project. Our contractors are paid on an hourly rate and cannot therefore lose money on one of our assignments.
- PROVISION OF EQUIPMENT: The majority of our contractors do not supply their own equipment or tools, many of them utilise the tools, plant and machinery of our clients.

Given that most agency workers do not fulfil the above criteria, they are not deemed to be self employed and therefore cannot work through us on their own CIS card.

CIS Payroll Companies

Due to the fact that CIS card holders are unable to work directly through an agency, the payroll Provider has to set up CIS divisions allowing CIS card holders to work through themselves as a self employed sub-contractor.

Essentially this is the same to us as using a payroll company, they invoice us gross for the hours worked x hourly rate on behalf of the contractor. They deduct the 20% tax for the contractor and fill in the required paperwork for the Inland Revenue and often complete their tax returns at the end of the year also.

The CIS card holder will pay the composite company a fixed fee calculated according to the candidates’ hourly rate but typically £15 - £20 per week.

Ltd Company Contractors

Management and Commercial candidates may take the step to set up their own Limited Company and operate as an ‘employee’ of this Ltd Company. This will enable them to invoice us for the hours worked and we can pay them Gross without any deductions being made. They will have an accountant and take care of their own NI and Tax payments at the end of the tax year.

In this case, it is not the individual that is providing the services but the company; the individual is a representative of the company even if he is the only employee.

Ltd Companies can be purchased fairly easily from companies’ house and a certificate of incorporation can be provided within a number of weeks.

Payroll Service Companies

Paid on this basis the individual will register with the Payroll Limited Company. These companies pay the contractor in a similar way to PAYE, by where all deductions for Tax and National Insurance are deducted at source.

The benefit of these companies are that legitimate expenses which are claimable with the Inland Revenue can be off set against the amount of tax which should be deducted from the contractor.

I.E: the contractor can claim back for Mileage, subsistence and any work related tools or clothing.

The amount of expenses claimable is deducted from the amount of tax due, and is not paid to them as an amount due, just as a reduction to the tax. This will therefore make this method of payment more tax efficient.

The individual will pay a weekly fee to the company of the order of £20 per week and will be paid by the company in the following way:

Expenses – They will fill in an expense sheet on a weekly basis including petrol, equipment hire, meals, safety equipment etc. This is obviously paid tax free.

The tax savings for a contractor on an hourly rate of £10ph + can be substantial while they are still meeting all Tax and National Insurance liabilities. Contractors can be set up very quickly in most instances.