Tax experts are warning that a ‘mini passport crisis’ will hit the construction industry next month as the Inland Revenue attempts to introduce its new tax scheme for the industry.
With only a fortnight to go before the new system starts, Revenue figures indicate nearly one in three of the 750,000 small construction businesses and workers hit by the changes have yet to apply for the necessary certificates.
Without them, they risk not being paid for work. Any contractor attempting to pay a sub-contractor without a new certificate faces a fine of up to £3,000 per payment.
John Whiting, tax partner at PricewaterhouseCoopers, likened the potential consequences to a mini passport saga, while the building industry warned it could grind to a halt as unpaid construction workers disappeared into the black economy.
In a move reminiscent of Jack Straw’s emergency measures surrounding new passport rules, the Revenue last week announced temporary cards would be available at tax offices to those who had not obtained the certificates.
Valid until 5 September, these will allow a contractor to make payments to a sub-contractor, although tax will have to be deducted. Ernst & Young tax director Alastair Kendrick, described the move as ‘crisis management’. He referred to cases where certificates had been applied for as far back as February, but had still not been received.
Paymaster General Dawn Primarolo told MPs last week all possible steps were being taken by the Revenue to issue certificates quickly.
A Revenue spokeswoman added that she was not aware of any backlog, although there had been a few problems because the computer couldn’t pick up the signatures where people had signed their application forms outside the appropriate box.
The controversial new regime is designed to reduce tax avoidance in the construction industry and replaces the long-established 714 certificate system.
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