Crackdown on false self-employment raises £122m

Aaron Morby 5 years ago
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A crackdown on false self-employment in construction has brought in a record £122m in extra tax for HM Revenue & Customs.

The sum recovered from HMRC investigations into businesses is 55% up on the £78.9m recovered in 2011/12.

The extent of the crackdown on false self-employment was revealed from a Freedom of Information request to HMRC from construction tax specialist NoPalaver Group.

According to the research, since the Construction Industry Scheme was introduced in 2007, HMRC has grown increasingly tough in its treatment of contractors, including forcing contractors to justify their self-employed status.

HMRC tax probe yields

  •     2006-07: £56.0m
  •     2007-08: £57.2m
  •     2008-09: £65.6m
  •     2009-10: £68.9m
  •     2010-11: £66.9m
  •     2011-12: £78.9m
  •     2012-13: £122m

Graham Jenner, director at NoPalaver, said: “The tax authority is now forcing businesses and contractors to prove that they have considered tax status fully, which can be extremely difficult – the construction industry is not always exemplary in keeping administrative records.”

“If they don’t have the paperwork to prove that they should be treated as self-employed, the company could face an investigation by HMRC.

“This could lead to a penalty worth the equivalent of six years’ worth of PAYE taxes and national insurance payments, plus interest and up to 100% of the tax in penalties.”

Jenner said that HMRC plans to clampdown on payroll companies and agencies this April would have a significant impact on the construction sector.

The new legislation will affect around 200,000 construction workers operating as self-employed through agencies.

From 6 April they will be subject to tax and employee national insurance contributions deducted at source, raising the expected tax take by £520m in the next year alone.

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