FOI release

SIA approved contractors not compliant with HMRC rules

Published 20 September 2022

1. Request

We require all information and documentation that you hold on the instances of non-compliance by approved contractors with HMRC decisions, manuals and protocols including the number of instances, the details of the matters and the eventual outcome. Please also include details of any resultant judicial review proceedings for the calendar year 2021.

2. Response

I confirm that the SIA holds this information.

In respect of the request for manuals and protocols, I can confirm that this information is exempt under section 21 of the Freedom of Information Act 2000, as the data is readily accessible within the public domain. For ease of use, I have provided you with the link which will take you to our website and the location of this data: Applying for ACS approval: guidance and forms.

The second part of the request is for all information and documentation held on instances of non-compliance by approved contractors with HMRC decisions, details about the matters and eventual outcome including details of any resultant judicial review proceedings for the calendar year 2021.

In order to facilitate the provision of information to address this part of the request I am of the view that it would be beneficial to set out where instances of non-compliance with HMRC decisions by approved contractors would be of interest to the SIA.

SIA approved contractors must conform with the ACS standard and demonstrate necessary capability and effectiveness in the operation of their business and in the protection of people, property and premises. The ACS standard consists of 7 criteria, which are broken down into a number of sub-criteria that, when met, demonstrate how excellent service delivery and sound business management are achieved. Criteria 4 relates to financial management: an SIA Approved Contractor is financially viable with sufficient resources to meet its current and future obligations. This criteria is composed of 4 sub-criteria and of relevance to this FOI request is sub-criteria 4.2, which states that the SIA approved contractor can demonstrate that it uses robust processes to manage finances and associated risks. 4.2.1 states that clear and effective management of the payroll can be evidenced. The required achievement level is set out in the ACS Self Assessment Workbook as follows.

The organisation complies with all the relevant tax and national insurance legislation concerning people they deploy. This requires complying with all of the HMRC guidance, including operating real time information correctly and on time. All the organisation’s people must be employees unless the organisation can evidence otherwise.

• Payroll is managed to legislative standards.
• Tax codes are checked and correctly applied in a timely manner and in compliance with HMRC guidance.
• Staff are paid through a PAYE compliant system.
• People who are subject to PAYE receive full employment rights of an employee.
• Month-end and year-end procedures are run within deadlines.
• There is a direct link between the hours worked and the wages paid.
  • This also applies where staff are paid by others, for example, a factoring company, an umbrella payroll company, an agency, or sub-contractor.
  • Organisations do not make unlawful deductions from staff pay.
• Payments to staff are made on time within the contractual payment cycle.
  • Where payments are made to labour providers/agencies (who then pay individuals), the business should undertake due diligence to ensure individuals are paid within an agreed period.
• All queries relating to payroll are handled effectively and lessons learned are fed back to improve procedures.
• There is clear information for staff on their pay, deductions and the payroll system in use
• Approved contractors show due diligence in determining or identifying the correct employment status based on actual practice, and that this is reflected in the completion of the CEST tool for each role.
• Where individuals are determined to be self-employed (using the CEST tool), approved contractors must demonstrate that the agency legislation doesn’t apply, otherwise, the operatives will be agency workers and all remuneration received for services provided will be subject to PAYE/national insurance.

During the calendar year 2021 there were 4 improvement notices raised in respect of non-compliance with criteria 4.2.1. These improvement notices were raised as a result of approved contractors not being able to demonstrate that the agency legislation does not apply. 3 approved contractors received a re-assessment and were found to have met the standard. The remaining approved contractor has been referred to HMRC for resolution.

No judicial review proceedings have been brought.

[Reference: FOI 0356]