Employing builders / labourers

[Incipiens Mox]

I have a main contractor who I'm planning to use to manage my build. He's suggested to me that is easier for him if I pay the guys that will work on the job directly rather than paying him and him passing it on. The reason given is that it takes him over the VAT threshold. Can anyone comment on this kind of set up? I don't think there's any specific reason why this might be a problem.

 

He would manage the guys on site on a day to day basis, though clearly I would be responsible for ensuring that they were paid correctly and the appropriate tax paid etc. And if I get it wrong, I'm on the hook.

 

Can anyone suggest whether this is ok and where I can get more information about my liabilities and responsibilities? 

Edited October 24, 2017 by Incipiens Mox

[Vijay]

Is H&S another issue to consider at all?

[Dee J]

A big question is whether these guys are self employed independent contractors with their own insurance cover and income tax arrangements - in which case it's just like any other contractor... or if you are employing them directly - when I'm sure you responsibilities will be far greater.

[warby]

Unless you are very business savvy, you will be entering a minefield. Avoid. There are Contract,  Vat, Tax and H&S implications depending upon the status of the labourers. Your project will dictate the VAT implications, e.g. if it is a new build or renovation.

[ToughButterCup]

Avoid, avoid, avoid.

He's either the PC or he isn't.  He's either in business or not. His being over the VAT threshold or not is completely irrelevant 

[nod]

1 hour ago, Incipiens Mox said:

I have a main contractor who I'm planning to use to manage my build. He's suggested to me that is easier for him if I pay the guys that will work on the job directly rather than paying him and him passing it on. The reason given is that it takes him over the VAT threshold. Can anyone comment on this kind of set up? I don't think there's any specific reason why this might be a problem.

 

He would manage the guys on site on a day to day basis, though clearly I would be responsible for ensuring that they were paid correctly and the appropriate tax paid etc. And if I get it wrong, I'm on the hook.

 

Can anyone suggest whether this is ok and where I can get more information about my liabilities and responsibilities? 

If you are paying them on a employed or self employed There health and safety becomes your responsibility As does his 

He should really have employers liability and I would be quite surprised if he was no vat registered already

[jack]

From memory, the VAT threshold is around £80k. I'd be very worried about a main contractor who isn't managing turnover of that order. Is he actually a main contractor though, or just a project manager?

 

What's really happening, almost certainly, is that you're paying his sub contractors cash so they and/or the main contractor can avoid tax and other charges/costs. He isn't employing them, either formally or on a contract basis. You probably aren't either, although the danger is that if something goes wrong, there'll be an argument that you have to win to avoid being responsible for all sorts of costs and penalties.

 

I'd be concerned about engaging a main contractor who's proposed this, even if he/she agreed to change the arrangement into something more conventional. 

 

 

[Jml]

1 hour ago, nod said:

If you are paying them on a employed or self employed There health and safety becomes your responsibility As does his 

He should really have employers liability and I would be quite surprised if he was no vat registered already

 

So if I appoint someone to do say groundworks for my extension, do I become responsible for their H & S?

[PeterW]

9 minutes ago, Jml said:

 

So if I appoint someone to do say groundworks for my extension, do I become responsible for their H & S?

 

You are anyway to a lesser extent when it comes to having any contractor on your premises - it's the householder duty of care and it's why household insurance has a liability element. 

 

What you are not responsible for is his own safety whilst undertaking the works - and he should have his own liability insurance to cover you from injury if you fall down an open hole he's left for example. 

 

some of this borders on CDM which we have done to death, but I would avoid any builder who wanted me to pay his employees or subs direct, as the contract law around who has liability for anything will get very grey...... Sounds like tax evasion to me...!

[ProDave]

This brings us onto site insurance.

 

I HOPE you all have a self build site insurance policy in place?  If so that will include your employers liability insurance.  So far only one person has asked to see mine, and that was the builder who built and erected the frame.

[nod]

19 minutes ago, Jml said:

 

So if I appoint someone to do say groundworks for my extension, do I become responsible for their H & S?

 

4 minutes ago, PeterW said:

 

You are anyway to a lesser extent when it comes to having any contractor on your premises - it's the householder duty of care and it's why household insurance has a liability element. 

 

What you are not responsible for is his own safety whilst undertaking the works - and he should have his own liability insurance to cover you from injury if you fall down an open hole he's left for example. 

 

some of this borders on CDM which we have done to death, but I would avoid any builder who wanted me to pay his employees or subs direct, as the contract law around who has liability for anything will get very grey...... Sounds like tax evasion to me...!

 

21 minutes ago, Jml said:

 

So if I appoint someone to do say groundworks for my extension, do I become responsible for their H & S?

 

22 minutes ago, Jml said:

 

So if I appoint someone to do say groundworks for my extension, do I become responsible for their H & S?

Groundworks is an easy one to answer Extension new build All Groundworks should come with a risk assessment due to heavy plant being used

HSE would argue that all trades must have a risk assessment 

But this isn’t the case on extensions and smaller jobs

 

But getting back to the original post

if I was paying a builder to run a new build for me I would expect to be paying he or she and not be paying individual workers and running around after them telling them how to work safely

[Incipiens Mox]

Thanks for the advice - even if it wasn't really what I wanted to hear. I've already had the discussion about tax liabilities, i.e. they will be met in full and no discussion about cash etc will be tolerated. Even so, I suspect that I would be directly employing the guys which, as you've mentioned, provides great scope for me to get it wrong on the tax front somehow and leads to all sorts of other questions about H&S etc.

 

Strictly speaking, the guy is a project manager with a team of regulars rather than a traditional builder per-se, but I would feel more comfortable if he took on the payment of the contractors and I paid him. I appreciate all the feedback and I will speak to him, though Plan B beckons.

[Ferdinand]

I think one discussion about cash *should* be tolerated.

 

"Cash job?"

"Not on your nelly!".

 

I do sometimes pay in cash, but run a system of signed time sheets and I explain explicitly at the outset that it will go through the books.

[PeterW]

I pay bank transfer for all my trades at their day rate. I don’t do any deductions as I am not getting into CSCS or any of the tax issues. If I transfer £500 to someone’s bank account details that they give me, how am I to know if that is their business account or thier offshore account ..?? It’s up to them to pay the tax otherwise you become the employer and that’s a whole world of different issues ..!

 

I very occasionally pay cash - usually to one off jobs and it’s never more than £2-300

 

[ToughButterCup]

So, @Incipiens Mox, in line with your forum name: get on with it! 

[Incipiens Mox]

4 hours ago, recoveringacademic said:

So, @Incipiens Mox, in line with your forum name: get on with it! 

 

Quite. This has been going on for far too long.

 

Speaking of VAT, my belief is that a lot of builders prefer not to be VAT registered as it would instantly push their rates up making them uncompetitive compared with unregistered competitors. There's also the paperwork which is not inconsiderable but a necessary part of a business with a growing turnover. Please correct me if there's more relevant reasons.

 

However, builders can apparently avoid charging VAT completely for labour or building materials in the case of new builds (see this website) so wouldn't that negate the extra cost argument, or am I missing something?

Edited October 25, 2017 by Incipiens Mox

[ToughButterCup]

Exactly.

[PeterW]

@Incipiens Mox they can avoid charging VAT but still incur it so have to do all the paperwork to claim it back. It’s also slightly more onerous for them as they also need to be ready to provide the detail to HMRC when requested that the jobs they have undertaken are VAT exempt. 

[jack]

1 hour ago, Incipiens Mox said:

Speaking of VAT, my belief is that a lot of builders prefer not to be VAT registered as it would instantly push their rates up making them uncompetitive compared with unregistered competitors. 

 

But it's just about impossible to be a builder and turn over less than the £83,000 VAT threshold. Just paying two tradespeople full time for a year will take them to that level, even without buying any materials. How much of a house will two trades build, even if the client were to buy the materials? And that's assuming no profit for the builder.

 

Any full-time "builder" who's not VAT registered is likely to be taking liberties with the tax system.

 

A project manager who works on your behalf and has you paying all the bills may be able to avoid the threshold, but as discussed, it does raise some liability and compliance issues.

 

[MikeSharp01]

14 hours ago, recoveringacademic said:

in line with your forum name: get on with it! 

How can starting soon ever actually result in starting? "Tomorrow and tomorrow creeps in this petty pace" In writing these few, now famous, words it is well known that the bard was having a bathroom installed - one of the first in England, as it was known at the time, by an infamous mate with whom he was having an Onoff relationship because the pace was lente and the confabulartio between them, in the form of sonnets sent by post horses, helpful, exciting, inspiring and supportive just grew and grew.... but, inter alia,  no bathroom was forthcoming. Mox, Mox.

[Ferdinand]

Cum vita brevis sit, nolite tempus perdere.

 

(Think that is self-translating).

 

Edited October 26, 2017 by Ferdinand

[ToughButterCup]

8 hours ago, MikeSharp01 said:

[...]

it is well known that the bard was having a bathroom installed - one of the first in England, as it was known at the time, by an infamous mate with whom he was having an Onoff relationship because the pace was lente and the confabulartio between them, in the form of sonnets sent by post horses, helpful, exciting, inspiring and supportive just grew and grew.... but, inter alia,  no bathroom was forthcoming. Mox, Mox.

 

I knew it. @Onoff does read poetry in the bathroom. Instead of DIY manuals.

[Jeremy Harris]

18 hours ago, jack said:

But it's just about impossible to be a builder and turn over less than the £83,000 VAT threshold. Just paying two tradespeople full time for a year will take them to that level, even without buying any materials. How much of a house will two trades build, even if the client were to buy the materials? And that's assuming no profit for the builder.

 

Any full-time "builder" who's not VAT registered is likely to be taking liberties with the tax system.

 

A project manager who works on your behalf and has you paying all the bills may be able to avoid the threshold, but as discussed, it does raise some liability and compliance issues.

 

I agree.  The chap that did our drive work and all the hard landscaping was VAT registered when we first started to use him, but decided that, as he was now doing smaller jobs on his own most of the time he would de-register.  I had him back to lay some paths and build a couple of bit of stuff from stone and he was struggling to stay under the VAT threshold, as a lot of his work was now smaller garden-type jobs where he was buying the materials.  He was quite grateful when I offered to buy the materials for the job, as it would reduce his turnover a bit and help keep him under the VAT threshold.

 

His reasons for de-registering were mainly to do with reducing his labour rate by 20%, to be more competitive with all the other non-VAT registered people locally doing similar work, but his view was that it was near-impossible to stay under the VAT threshold doing hard landscaping work, just because more than half his costs were materials.  Self-builders may be happy to pay up front for the materials and claim the VAT back, but very few other people are, it seems.  He reckoned that the only way most of the non-VAT registered people could get away with it was by doing a fair bit of "cash in hand" work and being creative with their tax and materials invoices..............

 

 

[Onoff]

12 minutes ago, recoveringacademic said:

 

I knew it. @Onoff does read poetry in the bathroom. Instead of DIY manuals.

 

The older I get the more I realise life's but a walking shadow...I certainly strut and fret. 

 

Old houses eh, the way to a dusty death!