Tough stance on tax change stuns contractors

Grant Prior 5 years ago
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Contractors have been left reeling by the tax authorities tough stance on changes to self employment which will send labour costs soaring from April.

Leading trade bodies and contractors attended a recent meeting with HMRC and Treasury officials to plead their case over the changes.

The Enquirer understands some employers were looking for April’s Finance Bill clampdown to be delayed – with one trade federation calling for a five-year postponement.

Contractors fear they are locked into fixed-price contracts which will see labour costs rise by up to 25% as thousands of workers are moved back onto PAYE.

But the authorities are standing firm on the timetable as they eye an estimated £520m increase in their construction tax haul.

One tax expert said: “I think people at that meeting where a bit taken aback at what they heard.

“The Revenue basically said they won’t be subsidising the industry a minute longer on this.”

National Access and Scaffolding Confederation President Kevin Ward was at the meeting and his organisation is fully backing the changes.

He said: “I was surprised how robust the Treasury and HMRC spokesmen were about the legislation and their desire to get it through.

“They gave no indication that they intended to soften it or delay it.

“The NASC fully support the planned changes to tax legislation proposed by HMRC which will help to stamp out the practice facilitated by some intermediaries/agencies of ‘bogus self-employment’.

“This will help in the creation a fairer trading environment where bonafide contractors who correctly remunerate their operatives via PAYE do not have to continue to trade at a disadvantage to unscrupulous businesses who have unfairly been using these aggressive tax avoidance schemes.

The plan is causing widespread panic in many sectors of the industry.

One source said: “The major players are gradually realising that this hits everyone below their Tier One suppliers.

“The payroll firms and labour agencies have gained such an influence now that they dominate sites.

“It’s a massive issue when you are on a fixed-price job relying on subcontractors who are suddenly going to see their labour costs shoot-up.

“This could send a lot of firms under.”

But one specialist said: “At least now we will all be competing on the same playing field.

“We have always employed our staff using the PAYE correct system, unlike some of our competitors who employ them through payroll agencies avoiding 13% NI and other costs.”

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