Small building firms have accused the Inland Revenue of imposing a nightmare tax classification switch that will lead to a massive rise in red tape and bureaucracy across the construction industry.
The industry is also angry that Revenue officers have already begun to impose the tax switch in some regions, breaching an agreement that the new rules would not be introduced until August 1999.
The switch is set to strip thousands of building firms of the 714C certificates that guarantee their right to accept gross payments. Only the largest companies, such as John Laing and Tarmac, are likely to retain these certificates.
Other companies that fail the tests will be offered a 714P certificate.
Under the 714P rules, building firms will have to undergo a series of security checks before they can be paid gross for building work.
Small building companies which act as sub-contractors will be hardest hit. Currently, they can fax details of their tax status to a main contractor. This allows them to accept gross payments.
But under the new scheme, they will need to travel to the office of the main contractor with a photocard to prove both the existence of the company and that they are allowed to calculate their own tax.
Before Christmas, two leading trade bodies met the Revenue to contest the move. Brian Flint, deputy director of the Federation of Master Builders, a critic in the past of the Revenue’s crackdown on self-employed building workers, refused to confirm that representations had been made to the Revenue or to comment on the current situation.
But industry sources said that the discussions between the two sides, which include the National Federation of Builders, are ongoing.
Alistair Kendrick, senior tax manager at KPMG, said the switch would cause building companies massive upheaval. ‘If companies work outside their local area they will find life very difficult.
I think any company told that they must have a ‘P’ certificate should contest it with the Revenue,’ he said.
The Revenue denied that officers were imposing the rules before the 1999 deadline.
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