Builders urge Revenue to repair tax structure

Earlier this month, the Revenue sent 13,000 letters to contractors, and 56,000 to subcontractors, in an effort to crack down on disguised employees in the construction industry. The move mirrored the department's IR35 battle with IT subcontractors.

'We hope that improved compliance with the employment status rules will yield an estimated £40m this year and £80m next year,' a spokeswoman for the Revenue said. 'This exercise will be repeated in April next year to a further group.' Alistair Kendrick, director of tax at Ernst & Young, said the Revenue had been approached by the industry because it was 'unhappy' with the way subcontractors were being regulated.

'Certain interested parties have been lobbying ministers,' said Kendrick. 'They believe that there needs to be a clear understanding of the status of workers. They just want it properly regulated.'

The Revenue confirmed the news, and said it had been approached by 'members of the construction industry and trade unions' because they were worried 'not all contractors were meeting their responsibilities on employment status'.

But Kendrick warned the move could backfire because, unlike the IT sector, there was no abundance of workers. 'There is a real worry that they would just go and work for companies that would hire on a self-employed basis,' he said. 'Experienced and quality workers will go off and work for whoever can give the best deal... the real concern is that they are going to build up the black economy.'

But George Brumwell, general secretary of the industry's union UCATT, said: 'By issuing these letters, the Revenue has made it clear the party is over for a lot of bad employers in the industry.'

This very much depends on the Revenue, said Kendrick. 'The Revenue has said it has the resources to do this, but I am not convinced it has.'

But a Revenue spokeswoman said the department had doubled its 'technical status resource' over the last six months to provide greater support for employment status work and the construction industry specifically.

Research carried out by UCATT estimated that there were between 300,000 and 400,000 false self-employed workers in the construction industry, and that the situation was costing taxpayers up to £2bn a year.