Builder tax threat

The Inland Revenue will press ahead with plans to strip up to 500,000 self-employed building workers of tax exemption certificates despite claims the changes are unnecessary.

The Revenue published draft regulations last week detailing how self-employed building workers can qualify for a tax exemption certificate and continue to be offered gross payments by a contractor.

Under the regulations, sub-contractors will need to show that their business is large enough to justify an exemption certificate. The Revenue has yet to say what the turnover level is likely to be, though it has consistently indicated it will be between #20,000 and #30,000.

The measures are due to take effect in August 1999 and form a major part of the Revenue’s crackdown on bogus self-employed workers.

As part of the crackdown, the Revenue has embarked on a rolling investigation of all building firms and sub-contractors. Officials examine whether sub-contractors are genuinely self-employed.

If they fail the test, contractors are forced to put them on the payroll.

But tax experts said if the crackdown had been successful this move would be unnecessary. Alistair Kendrick, senior tax manager at KPMG, said: ‘If the Revenue has been so successful getting people out of self-employment, why does it need to do this?’

The Revenue said it had conceded allowing sub-contractors to include income from building work outside the scope of the certificate, but would press ahead with the overall scheme.