TaxCorporate TaxPBR in depth: Red tape cuts for construction industry

PBR in depth: Red tape cuts for construction industry

Chancellor Gordon Brown has admitted defeat in his attempt to move construction workers on to company payroll systems and is now 'seeking views' from the industry to cut red tape.

Link: Pre-Budget special report

Announcements made in the Budget today spell the end for the government’s construction industry scheme, which was introduced in 1999 and designed to force self-employed construction workers to become employees whose income would be taxed at the source.

But Ernst & Young tax director Alastair Kendrick accused the Inland Revenue of ignoring industry criticism in 1999 at the time of the scheme’s launched but and added that he hoped that ‘this time the Inland Revenue will listen’.

The 1999 tax changes came under fire for imposing an additional administrative burden on employers in the construction industry. The changes were introduced following a government drive in 1997 to stop tax avoidance by foreign workers, who often left the country after finishing a job.

‘A lot of [building] people should be employed, but this is typically a self-employed industry. The 1997 drive was to take on a payroll system. The Budget now said that was not effective,’ Kendrick said.

Under the new building tax proposals registration cards and cross payment certificates will be replaced with a verification service. The government also wants to introduce an employment status declaration.

Under the plans vouchers will be replaced with periodic returns and the scheme would be further boosted by implementation of a new Inland Revenue computer system to trace non-compliant businesses online.

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