Builders face tax ‘chaos’

Fears are growing of construction industry chaos in August after a lacklustre response to the Inland Revenue’s preparations for a new tax regime for the industry.

The Revenue is concerned by the small number of people who have signed up to the new construction industry tax scheme, designed to reduce fraud by tightening the rules by which building subcontractors can receive payments without tax being deducted at source.

Industry finance chiefs fear problems will arise from the Revenue’s insistence that construction firms will be unable to pay subcontractors who have not signed up to the new scheme by August, when it is due to begin.

The Revenue is understood to have sent out around 800,000 application forms to subcontractors who will be affected, but is refusing to release details of how many responses it has received.

Sources suggest the number is low, despite a Revenue incentive that those signing up by April would not have to renew their membership of the new scheme as soon as those waiting until the last minute.

Les Angell, group tax manager at construction giant John Laing, said: ‘The Revenue believes that subcontractors must have a certificate to be paid. But we have pointed out that we have contractual obligations towards them.’ He said it would be difficult to deal with such a situation should it arise, and predicted a last-minute rush by subcontractors to sign up.

After approaches from the Revenue, Laing, one of the major companies involved in the millennium dome’s construction, has agreed to remind its subcontractors to fill in the forms.

The Revenue has also embarked upon a major marketing campaign to raise awareness of the new system in the building community. It includes advertising on petrol-pump nozzles and beer mats, and mobile information centres visiting major construction sites, such as the dome.

Francesa Lagerberg, of the English ICA’s tax faculty, said: ‘The construction industry is specialised and contains a lot of people who are not the form-filling type.’ She predicted that many people could be in for a nasty surprise when the scheme comes into force this summer.

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