The taxman raised a record amount from investigation into construction firms’ taxes in the last financial year

Construction site

Tax investigations by HM Revenue and Customs have bought in a record £131m in revenue from construction companies, it has been revealed.

According to information obtained by accounting service provider NoPalaver under the Freedom of Information Act, HMRC revenue from tax investigations into construction firms rose by 7% to £131m in the year ending March 2014, up from £122m in the previous year.

The increase is due to efforts by HMRC to make construction firms bring employees in house under Pay as You Earn (PAYE) system rather than treating them as self-employed.

The crackdown is part of a wider effort to boost tax revenue through compliance work.

Current arrangements in the construction sector are complex, with self-employed subcontractors moving between projects regularly. The erratic nature of the work can lead to mistakes in paperwork and tax status.

Graham Jenner, Director at NoPalaver said: “If the company doesn’t have the paperwork to prove that their employees should be treated as self-employed, the company could face an investigation by HMRC.”

“HMRC has been suspicious of self-employed construction workers for some time. It is clamping down on companies hiring individuals it feels don’t meet its strict criteria and I would expect them to continue to do so as it seeks to generate more revenue.”

In September HMRC confirmed that from April 2015 employment intermediaries will also have to start providing quarterly reports explaining why workers on their payroll are not using PAYE.

Failing to comply could result in an increased tax bill or a loss in flexibility of employment.