Move to come as part of clampdown on tax avoidance, despite lobbying from industry to delay measures
George Osborne is expected to confirm plans to crack down on tax avoidance today’s Budget, including moves to tackle bogus self-employment.
According to the Treasury around 300,000 workers in the construction sector are in bogus self-employment, costing HMRC more than £380m.
Under the current practice, agencies or middlemen provide self-employed workers on a site, meaning such workers avoid PAYE (Pay as you Earn), the system HMRC uses to collect income tax and Naional Insurance from employees.
As a result, the workers are substantially cheaper, improving the margins of subcontractors and main contractors.
Today the chancellor is expected to confirm plans, unveiled in the autumn statement in December, to clamp down on tax avoidance and aggressive tax planning, including by “preventing employment intermediaries from disguising employment as self-employment to avoid tax”.
The UK Contractors Group has called on the chancellor to delay the introduction of the new rules until January 2015, arguing that it supports reform but that “the industry needs time to factor in the changes”.
Liz Bridge, secretary of the Construction Industry Joint Taxation Committee, said the new rules will force contractors to put up prices but nevertheless believed it unlikely that Osborne will delay.
“People are genuinely frightened because they’re only just coming out of a recession,” she says. “But I think the chancellor will say he is going ahead with these changes.”
For a further round up of what the construction industry can expect from today’s Budget, see Building’s preview here.
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