Industry continues to be a main target of HMRC tax investigations

money cash

Tax investigations into the construction industry yielded a record of £154.2m in the year ended 31 March 2015, up 17% from £131m the previous year.

According to accountancy group UHY Hacker Young, the amount collected by Her Majesty’s Revenue & Customs’ (HMRC) investigations in the sector has more than doubled in the last five years, as the industry continues to be a main target for the organisation.

HMRC believes there to be high levels of “false self-employment” due to the “cash in hand” nature of the industry and the large proportion of self-employed contractors and sub-contractors, UHY Hacker Young said.

The figures come after a crackdown by HMRC on the construction industry in particular, with chancellor George Osborne announcing measures in the last two Budgets designed to tackle false self employment.

It claims that many individuals finding work through intermediary companies should not be classed as self-employed but instead should be subject to PAYE, and contests that both the employer and the self-employed worker are paying a lower amount in National Insurance (NI) contributions than they should. 

UHY Hacker Young said that those who are accepted as being self-employed by HMRC will still require a sub-contractor certificate otherwise the contractor should deduct tax from payments made.

Companies contracting self-employed workers or sub-contractors must also be able to prove to HMRC that these workers are genuinely self-employed otherwise up to six years’ worth of PAYE and National Insurance contributions, plus interest and up to 100% of the tax in additional penalties may need to be paid, the accountant added.

Changes implemented in April 2015 mean that employment intermediaries are also now required to provide quarterly reports reflecting all the workers on their payroll not subjected to PAYE.

Roy Maugham, tax partner at UHY Hacker Young said: “The construction industry is seen as an easy target by HMRC and has been subjected to increasingly intense investigations in the last few years.

Even if a contractor believes themself to be, or is classed as self-employed by other organisations, it does not necessarily mean that HMRC will accept this status.”

He adds: “The increased yield from tax investigations and the new rules indicate just how much HMRC are clamping down on tax evasion in the construction industry, and this trend is likely to continue in the future.”


HMRC’s yield from tax investigations into the construction sector