Tax crackdown misses the point on false builders

by - 8th November 2011, 9.15 GMT

A new HMRC crackdown on construction companies and workers avoiding paying tax is not addressing a major issue, UCATT has warned.

The HMRC has recently launched a taskforce in the North West of England and North Wales to crackdown on construction traders who are not paying tax, through suppressing sales or overclaiming expenses.

However UCATT is disappointed that the taskforce makes no mention of the problem of false self-employment, which is endemic in the construction industry. Falsely self-employed workers are officially categorised as self-employed but have all the characteristics of an employee.

By making workers falsely self-employed companies avoid paying employer National Insurance contributions of 13.8 per cent. False-self employed workers do not receive holiday pay, sick pay, and redundancy pay, receive fewer benefits and do not have pensions. By being self-employed they pay slightly lower levels of employee National Insurance contributions and can claim expenses, via a self-assessment tax form.

Academic research conducted for UCATT in 2008 found that 400,000 workers in the UK were falsely self-employed and that false self-employment was costing the Exchequer around £1.7 billion per annum.

False self-employment is a particular problem in the construction industry, due to the Construction Industry Scheme a unique stand alone tax scheme where self-employed workers are deducted tax at source, rather than being responsible for paying their own tax like most self-employed workers.

The growing use of employment agencies and payroll companies by construction employers in recent years has also increased the level of false self-employment in the construction industry.

Jimmy Woods, Acting Regional Secretary for UCATT’s North West Region, said: “The HMRC is right to crackdown on construction companies who are not paying the correct level of tax. However, it is wrong to target one form of deception while turning a blind eye to other forms of evasion.

“Not only do false self-employed workers not receive basic employment rights such as holiday pay but their employment status means that they are not denied state benefits and are unlikely to have provisions for their retirement.”