HM Revenue & Customs’ crackdown on bogus self-employed construction workers is paying dividends with revenues falling from tax investigations. Revenue fell 34% last year to £102m, down from £154.2m in 2015.
According to national group of accountants, UHY Hacker Young, this is the lowest level since 2012
and that construction workers converting from self-employed to PAYE is a key driver of HMRC’s yield from investigations into the sector falling so dramatically.
The industry has been a particular target in the past few years, especially surrounding the area of “disguised employment”, where workers classed as self-employed are treated effectively as employees by construction companies.
UHY Hacker Young said the recent clampdown may have encouraged more construction companies to convert workers to PAYE to avoid becoming a victim of HMRC’s crackdown on the sector.
A self-employed worker often pays less tax than someone who is on the books of a business as an employee due to tax-free allowances for expenses, while companies are not required to pay costs such as national insurance.
Roy Maugham, tax partner at UHY Hacker Young, said: “The construction industry seems to be getting the message after years of being targeted by the revenue.
“HMRC has long seen much of the self-employment in the sector as simply an artificial way to cut costs. Companies could now have decided to avoid the chance of fines and lengthy investigations by ensuring more workers are paid through PAYE.
“Construction has traditionally had a far higher proportion of self-employed and contracted workers because of its project-by-project nature.
“Moving from job to job also means paperwork errors are far more likely from both the business and the individual.”
He added: “Despite the fall in yield last year, HMRC has been extremely successful in increasing their total revenues as a result of construction industry investigations and have showed no indication of easing the pressure on the industry yet.”