Romanian sub-contractor.

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  • #38933
    Stalbansbenefits
    Participant

    Just wondered how other authorities treat PFA sub-contractors. We have a Romanian national who fits floors in the construction industry. He is a sub-contractor, so makes his own arrangements for Tax and National Insurance.

    I would have normally treated him as self-employed, and therefore there would be no requirement for him to be registered, and he could claim benefit for the weeks when he wasn’t actually working, but was looking for work (following Tilianu). However, Tilianu talks about a worker being someone who ‘performs services for and under the direction of another person in return for which he receives remuneration’. If I apply this definition I’m thinking that sub-contractors should be treated as being employed and not self-employed, and obviously where the claimant is a PFA this makes a huge difference in how we treat them.

    #110256
    Kay_Tade
    Participant

    I think these links should help rest your mind, as I’m sure you know, CIS sub-contractors/contractors mostly, if not always, are self-employed.

    http://www.hmrc.gov.uk/calcs/esi.htm

    http://www.hmrc.gov.uk/cis/intro/con-or-sub.htm

    As an aside, Tilianu was mainly focused on the distinction between the rights of a “worker”, a self employed person, an “inactive” EEA and the retention of the status, or not, as the case may be.

    [My view is that Tilianu applies to a person no longer self-employed as opposed to a CIS worker waiting for the next contract]

    #110257
    jane
    Participant

    But Mr Tilianu was a construction industry worker and it was found that he did not retain his self emplyed status when he was not working.

    #110258
    Kay_Tade
    Participant

    The issue before the court was whether sub-paragraphs 3(b) and (c) of Art.7 include the self-employed. In the particular circumstances the court decided it did not because they had ceased work. Art 7 refers to the self employed as well as workers so you can retain your self employed status if for some reason you are temporarily unable to work.

    Tilianu lost because he argued self-employment comes within the meaning of “employment” which it clearly does not. I think he would have had a chance if he argued an alternative[Should have argued Art 7(3)(a)]but he did not and we will never know. That’s my view anyway.

    Edited for clarity.

    #110261
    jane
    Participant

    I’m also minded that CIS workers are not classed as self employed during periods of unemployment…
    See Secretary of State for Work and Pensions v AL (JSA) [2010] UKUT 451 (AAC)

    In this case a person who was self employed in the normal sense of the word, rather than a CIS worker (he was a joiner) was found to still be self employed when a slump in the building trade meant that he was temporarily out of work; however, the UT Judge distinguished the case from a CIS worker who could be “under the direction of another person in return for which he received renumeration” and the outcome could have been different.

    If they are not self employed, then they are employed and could retain their worker status under article 7(3).

    What do you think?

    #110262
    Kay_Tade
    Participant

    I think the CIS itself causes confusion because you could be a CIS sub contractor and be employed or self employed, depending, and I think that’s what’s happended in the case you cited. Must admit have not read it yet.

    I agree that if they are “employed” they would retain the status under Art 7(3).

    #110289
    Anonymous
    Guest

    BRB

    #110301
    David
    Participant

    [quote=Peter Barker]BRB[/quote]
    Please explain what this means!

    #110303
    jane
    Participant

    Be right back!

    #110304
    Anonymous
    Guest

    Just reading a couple of things, which I should have read before I splurged, hence the edit. But i will indeed be right back.

    #110778
    Stalbansbenefits
    Participant

    I’m still waiting for Peter’s considered response – it’s been almost 2 weeks now!!

    #110779
    Anonymous
    Guest

    Ah, the little grey cells … first thing in the morning I promise

    #110787
    Anonymous
    Guest

    So you need to establish:

    – When he is on a contract, is the claimant self-employed or a worker?
    – If he is self-employed, is he still self-employed when he is not on a contract?
    – If he is not self-employed, what is the significance of his A2 nationality?

    Tilianu seems like a promising case when you first look at it, because he was a CIS sub-contractor trying to claim benefits during a period when he wasn’t working. But unfortunately the key questions that concern the OP were not argued in Tilianu: the parties agreed that he was self-employed while on a contract, and that he had ceased to be self-employed when he made his claim. The case was therefore confined to a narrow point of construction (HA! see what I did there?): do the provisions in Article 7 governing unemployed workers apply to the self-employed, and thanks to Tilianu we know they do not.

    So what is the status of a CIS subbie? It is important to recognise that European terms need to be given a meaning that can apply consistently across the whole of the EU: any special meaning that a particular term might have under domestic law in one member state will not necessarily apply in another. Thus, for example, in the Levin and Kempf cases the European Court said that minimum subsistence levels in the Netherlands do not determine whether employment is effective and genine for EU purposes. And if we look at Article 49 of the Treaty, we see immediately that a one-man band company director, who would have the status of an office-holder and be taxed as an employee in the UK, shares the same status under EU law as a self-employed sole trader. Therefore we cannot say that anyone who is categorised as self-employed for the domestic purposes of tax, NI and employment law must automatically have that status in European law as well.

    CIS subcontractors are regarded as self-employed under domestic law, but this strikes me as an expedient fiction that has been created to balance the conflicting needs of HMRC and the industry. In the eyes of Articles 45 and 49 TFEU, it seems to me that a CIS subcontractor may very well have more of the characteristics of a worker than a self-employed person, with the particularly strong factor being the subordinate relationship with the employer – basically taking orders from the guv’nor. You would probably have to decide every case on its own facts, but I would expect that many CIS subcontractors would be found to be workers. The classic description of a worker comes from the Lawrie-Blum case (British trainee teacher in Germany):

    [quote]The essential feature of an employment relationship … is that for a certain period of time a person performs services for and under the direction of another person in return for which he receives remuneration.[/quote]

    Whereas the best definition of a self-employed person comes from Jany & Others:

    [quote][a] person providing [a] service outside any relationship of subordination concerning the choice of that activity, working conditions and conditions of remuneration; under that person’s own responsibility; and in return for remuneration paid to that person directly and in full.[/quote]

    CIS subbies might struggle on all of those points: they are not in charge of conditions on the site, they probably report to a foreman, they may well have a working day dictated by the contractor with payment by the hour rather than a price for the job, and they don’t receive their remuneration in full because the contractor pays some of it to HMRC.

    If you conclude that your claimant is in fact a worker for the purposes of Article 45 he has a big problem because he’s not allowed to work unless he has A2 authorisation or is exempt from that. Almost certainly, the Home office won’t see it that way – they will be quite content for A2 nationals to work in the CIS scheme having a status that is regarded as self-employed in domestic law. But there is authority for a benefits decision maker to disregard a person’s employment status for the purposes of tax etc and make a decision for benefit purposes only that the person has some other status: R(FC)2/90 and R(FC) 2/92. So you could conclude that the claimant is not self-employed, therefore he does not have a right to reside and his benefit claim fails, even though the Home office will not regard him as working illegally.

    On the other hand, should you conclude that he is self-employed after all, I would not see Tilianu as authority for any general proposition that CIS subcontractors immediately cease to be active when a contract ends. As I say above, that point was not contested in Tilianu and on the particular facts of his case there was a clearly identifiable end point: he had left his last CIS contract in December, done something or other for a relative for a few weeks and then gone into hospital at the end of February. I think you could quite properly conclude that a CIS subcontractor who is at home between contracts waiting for a phone call is still self-employed, if that’s what he was to start with.

    Finally, 2011 UKUT 108 AAC is a case on the Teixeira/Ibrahim theme where the claimant is arguing that the children of self-employed people should enjoy the same rights as those of workers under Reg 1612/68. Judge Jacobs has referred questions to the European Court, including the following:

    [i]”[whether] there is a general principle of EU law that equates the position of workers and the self-employed”[/i]

    Depending on the answer, and how sweeping its scope, that could supersede the one point of law that Tilianu did decide.

    #110842
    David
    Participant

    Peter,

    Superb post, well worth the wait!

    Based on the above, I’d be inclined to treat him as a worker, rather than self employed. Does anyone have a different view?

    #110868
    jane
    Participant

    I’ve recently referred a CIS worker to the Tribunal service as a worker rather than self employed.

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