Is your labour-only subcontractor actually an employee?

CIS status and employment status are different questions. A subcontractor can be perfectly compliant under CIS and still be, in HMRC's eyes, an employee for tax purposes. If they are, the liability for PAYE and National Insurance sits with you, going back years, with interest and penalties.

The factors that matter

• Control: do you tell them what to do, when and how?
• Substitution: can they send someone else in their place?
• Mutuality of obligation: are you obliged to give them work and are they obliged to take it?
• Financial risk: do they provide their own tools and materials, and can they make a loss on a job?
• Integration: do they look like part of your workforce to the outside world?

No single factor decides it. Long-term labour-only operatives who turn up every day, use your kit and take instruction from your site manager are the highest-risk group.

What to do about it

Review the supply chain once a year. Put the genuinely self-employed on proper written terms that reflect reality. Move the ones who aren't onto payroll, or through an umbrella company that operates PAYE. Keep evidence of the review. The cost of getting this right is usually much less than the cost of an HMRC status enquiry.

This article is general guidance and not advice on your circumstances. Talk to your accountant before acting on it.