HMRC has clamped down on self-employed workers in the construction industry, with annual yields from its investigations into the sector increasing from £131m to £154.2m in 2015, according to UHY Hacker Young.
The government department saw a 17% increase in takings from the sector in the year ending 31 March 2015. HMRC has doubled the amount in tax collected from the construction industry in the past five years.
HMRC has cracked down on the construction sector in the past few years, with UHY Hacker Young explaining that the “cash in hand” nature of the industry and the large proportion of self-employed contractors and sub-contractors has given HMRC reason to believe that there is high levels of “false employment” within the sector.
The tax authority has made it clear that individual workers should not class themselves as self-employed when searching for work through an intermediary, but instead be subject to PAYE. HMRC also demands that self-employed workers need to have a sub-contractor certificate. If not, contractors should deduct tax from any payments made.
Some construction bosses that contract self-employed workers are unable to prove to the taxman that they are actually self-employed, as they more often than not lack the correct paperwork. UHY Hacker Young has warned that any companies that fail to provide the correct paperwork risk paying up to six years’ worth of PAYE and National Insurance contributions, plus interest and up to 100% of the tax in additional penalties.
Roy Maugham, tax partner at UHY Hacker Young said: “The construction industry is seen as an easy target by HMRC and has been subjected to increasingly intense investigations in the last few years.”
“Construction typically has a far higher proportion of self-employed workers and sub- contractors than most sectors, and they will often move jobs more frequently. When this happens it’s more likely that mistakes or omissions might be made to paperwork or a worker’s tax status.”
Maugham added that just because some contractors believe themselves to be self-employed, it doesn’t necessarily mean that HMRC will accept this status.
“Individuals and companies working in the construction industry must make sure that they have all the relevant paperwork otherwise they risk a high penalty from HMRC,” continued Maugham.
Report argues that the government must change the way it makes tax and budget decisions
Committee expresses concern about costs to businesses and April 2018 implementation date
Andrew Tyrie airs views on the Finance Bill, 'Making Tax Policy Better' report, and Brexit
Top 25 firm HW Fisher & Co has acquired London firm Rhodes & Rhodes