'IR35' clampdown to hit construction industry

The Revenue released draft and secondary legislation last week outlining its plans to penalise construction companies that employ contractors who are not actually self-employed.

'[The legislation] gives a lot of additional responsibilities to construction companies, and introduces new [fixed financial] penalties against those that don?t comply,' said Alastair Kendrick, director of tax at Ernst & Young.

He described the legislation as a 'minefield' and said that a construction firm has to be satisfied any contractor it employs is a self-employed worker.

'If the Revenue believes the contractor to be employed then the company is liable for a penalty. The problem is that determining whether the person is employed or self-employed is not easy.'

He went on to say that the Revenue is 'washing its hands of all policing of the scheme and passing the responsibility on to the companies'.

The legislation will come into force in April 2006 with Kendrick saying smaller firms will be hit the hardest.