Post 1: Misclassification Risk – When “Self-Employed” Isn’t What HMRC Thinks

Many construction and civil engineering firms use self-employed sole traders for project work. It feels simple, flexible, and familiar, but it can quickly become a problem if those workers are not genuinely self-employed in HMRC’s eyes.

What the issue is

HMRC focuses on how people actually work, not just what the contract says. If a sole trader is working under supervision, direction, and control, HMRC may decide they are really an employee.

When that happens, the company becomes responsible for unpaid PAYE, National Insurance, and penalties because those individuals should have been on PAYE rather than paid as self-employed.

What this looks like in real life

If your site team wears your PPE, follows your site manager’s instructions, uses your equipment, and works set hours, HMRC could class them as employees. That can mean several years of backdated tax, NI, and fines.

The financial impact

Even a small reclassification can snowball. Once one worker’s status is questioned, HMRC often reviews your entire labour setup. The result can be a large tax bill and a serious compliance headache.

How to protect your business

By engaging self-employed workers through NRP’s CIS model, you gain the flexibility of self-employment with the safety of full HMRC compliance.

Workers remain self-employed, but NRP verifies, insures, and manages them under CIS rules, taking care of deductions, submissions, and records.

It keeps your structure flexible, your workforce compliant and your company protected.

Case Study: CIS – Disguised Self Employment in the Construction Industry

Next up – Post 2: HMRC Investigations – Why One Mistake Can Open Every Door

Contact Steve McDermott if you would you like to know a little more about the risk and benefit of outsourcing you contractor payroll, and have No-obligation chat:

steve.mcdermott@newredplanet.com or 07854 881 220 or 0161 713 1730