Chancellor looks to unions for assistance in beefing up toothless tax rules.
Chancellor Gordon Brown intends to crack down on bogus self employment with a purge of tax evaders in the industry.

Construction union general secretary George Brumwell said that Brown had promised a review at a Labour party economic meeting last Saturday.

Brumwell said that Brown was keen to re-examine self employment in the construction industry in the wake of a judicial review in April that upheld the Inland Revenue's position on self-employed computer consultants.

Brumwell, who believes that the current industry scheme is toothless, said Brown had indicated that he would also welcome research on self employment currently being undertaken on behalf of UCATT.

Transport minister John Spellar confirmed this week that the government would be looking into the issue of self employment.

He said: "This is of considerable interest to government and rightly so, because it can distort competition between companies and can also cause a significant loss of revenue. It is an area that we need to be examining with the unions."

Brumwell said that UCATT had commissioned research from the University of Manchester, and that it would come with recommendations.

He added that UCATT was considering joining forces with the Construction Confederation to lobby the Treasury.

Stephen Ratcliffe, the chief executive of the Construction Confederation, confirmed that informal talks had been held with Brumwell.

This is of considerable interest to us, and rightly so, because it can distort competition and can cause a significant loss of revenue

John Spellar, transport minister

He said their subject had been the effect of bogus self employment on health and safety. A decision on whether to link up with UCATT in a joint approach to the Treasury would have to wait until the union made its position clear.

Union concerns over bogus self employment centre on the loss of employment rights. If a worker is deemed to be self employed, he or she loses benefits such as redundancy and holiday pay. In addition, contractors do not have to pay the employer's National Insurance contribution of 12% of salary, which the union believes could be used to develop the industry.

One union insider claimed that the problem was the result of too many CIS cards, which people need to be legally self employed in the industry.

He said that it was up to Inland Revenue compliance units to monitor contractors more closely and to check that employees were bona fide self-employed.

He said: "Currently, anybody can pick up a CIS card on a Monday and be deemed self-employed by Tuesday morning. Compliance units are not doing their job properly."

Brumwell added that the union's ultimate goal was to persuade the government to insist on directly employed workers on all public sector projects.

He said the government procured nearly half of all work and should set an example.

Tax in the construction industry: the story so far

The Construction Industry Scheme was introduced in 1999. Before that many subcontractors were automatically paid gross of tax. The new scheme brought in more stringent tests, tax certificates, and, in default of certificates, registration cards. Employers must see a CIS card before making any gross payments. However, the unions claim that contractors classify individual workers as self employed to avoid national insurance contributions. The scheme has had a troubled history. Its launch was delayed after contractors lobbied for a three-month moratorium. In November 1999, the Inland Revenue carried out a review after complaints that the scheme was too expensive to administer. At the same time paperwork for contractors earning less than £5m was also reduced.