Construction businesses in new tax probe
The UK's construction industry could face a massive tax bill next week over potential employment misclassification claims, according to Big Four firm Ernst & Young.
Link: ‘IR35’ clampdown to hit construction industry
The Inland Revenue will send letters to around 13,000 contractors and 44,000 subcontractors in the construction industry suggesting that they may have misclassified their workers in the past as self-employed when they were really employees.
In a statement E&Y said that if this is the case, businesses could owe ‘a small fortune’ in unpaid tax and national insurance plus interest as well as possible penalties. It warned that businesses that receive this letter ‘need to review their practices without delay’.
The Big Four firm said that the tax regulator aims to target these businesses with compliance reviews and, if their suspicions are correct and tax and NIC is due, businesses which have ‘not put their house in order’, can expect to face penalties. It claimed that these could be as high as 100% of the tax and NIC due – on the basis that they had been warned and yet they failed to act.
Anne Redston, tax partner at E&Y, was pessimistic about the new crackdown on subcontractor status: ‘The status of workers is a complex area and businesses receiving these letters should seek expert help as soon as possible.
‘The costs of failing a Revenue audit will be high, but the knee-jerk reaction – putting all workers on the payroll – will damage the business in other ways.’