TaxPersonal TaxRevenue U-turn on builders’ tax

Revenue U-turn on builders' tax

Concessions will allow self-employed construction workers to be paid gross next year. Phillip Inman reports

The Inland Revenue has caved in to demands for a relaxation of tough rules designed to stamp out bogus self-employment in the building industry.

Major building companies immediately attacked the Revenue’s climbdown, saying it caused unnecessary confusion and extra costs only a short time before the new rules for building workers were due to come into force.

The concessions will allow thousands of self-employed workers to be paid gross wages who would otherwise have had to accept payments after deductions for income tax and national insurance contributions.

In June, the Revenue announced building workers would need to earn more than #30,000 before they would qualify for a CIS5 certificate, which would entitle the holder to gross payments. The certificate is due to take effect from 31 July next year and replaces the current 714 certificate.

Last week, it announced private income could be included in the turnover calculation and not just work covered by the certificate. The decision will allow thousands of workers to boost their ‘qualifying’ income and gain a CIS5 certificate.

Revenue officers, who said the old 714 system was widely abused, have held discussions with industry representatives for the last three years with the aim of designing a new tax scheme. It was estimated that between 200,000 and 600,000 of the one million building industry workers would be forced out of self-employment into accepting payments after tax or full-time employment.

Liz Bridge, tax expert at the Construction Confederation, believed the latest move would increase the number of workers eligible for certificates by 100,000. She said her organisation was disappointed the Revenue had rushed through the changes without consulting her organisation.

‘They have changed the scheme radically at the last moment and that adds a great deal of uncertainty. We believe it will add to the costs of the larger contractors who will effectively manage the scheme.’

A Revenue spokesman said the costs of compliance would be the same under the new scheme. He denied the Revenue had failed to consult widely about the changes.

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