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NoPalaver, a provider of accounting services to contractor, says that HMRC’s crackdown on construction companies paying their workers as self-employed and not PAYE is part of its wider effort to boost its tax revenue through compliance work. It sees the construction sector as an easy target to generate more revenue.
According to the group, HMRC is forcing construction companies to justify their workers’ self-employed status, which has caused problems for many construction companies, as they frequently lack the paperwork to prove that their workers are genuinely self-employed.
NoPalaver explains that working arrangements in the construction sector are complex. Self-employed subcontractors move between jobs regularly. Erratic working patterns like this create lots of opportunity for mistakes with paperwork and tax status.
Graham Jenner, Director at NoPalaver said: “Construction work naturally attracts high numbers of self-employed workers.
“If the company doesn’t have the paperwork to prove that their employees should be treated as self-employed, the company could face an investigation by HMRC.”
But not having the correct paperwork can lead to a penalty worth the equivalent of six years’ worth of PAYE taxes and national insurance payments, plus interest and up to 100 per cent of the tax in penalties.
Mr Jenner said: "HMRC has been suspicious of self-employed construction workers for some time. It is clamping down on companies hiring individuals it feels don’t meet its strict criteria and I would expect them to continue to do so as it seeks to generate more revenue."
Intermediaries
NoPalaver also says that as well as targeting construction businesses directly, HMRC is now also turning its focus to the employment intermediaries who help to process the pay of contractors.
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In a recently published update (September 4 2014), HMRC has confirmed that from April 6 2015, employment intermediaries will have to start providing quarterly reports explaining why workers on their pay roll are not using PAYE.
Graham Jenner said: “HMRC is ramping up its efforts to clamp down on tax-evasion in the construction sector. It has long sought to force self-employed construction workers to be classified as employees and is now heaping the pressure on employment intermediaries in its effort to treat self-employed workers as employees for tax purposes.
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Susie Hughes © Shout99 2014
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