Tax-change threat to construction industry

Proposed changes to the way the majority of builders are taxed threaten to hamper the recovery of the UK’s beleaguered construction industry.

A planned crackdown on the Construction Industry Scheme (CIS) will mean up to 300,000 bricklayers, plumbers, carpenters and plasterers working as sub-contractors will effectively lose their self-employed status in the eyes of the taxman, according to leading accountancy body the ICPA.

The moves are intended to catch out those who it is believed falsely claim to be self-employed to reduce their tax liability, but the ICPA claims the Government has failed to realise the chaos the new rules will create. This is in addition to the impact the changes will have on struggling building firms.

ICPA chairman Tony Margaritelli said: “The vast majority of builders move from site to site as required.

“These proposals will effectively mean they become ‘employees’ of each firm that is using them for the period of their contract with them and are taxed on a PAYE basis.

“It’s a ridiculous idea — individual sub-contractor builders will generate P45s all over the place, with most employers deducting emergency tax, or worse still, using a BR coding.

“This will increase the administrative burden for building companies as they have to deal with numerous workers employed on short-term contracts — all subject to the full force of growing employment legislation.

“This makes a mockery of the Government’s claims that it is trying to reduce red tape for business.”

HMRC estimates that altering the tax regime will generate around £350 million each year, though the ICPA believes the bulk of this money will be from additional employers’ National Insurance charges levied on construction companies.

Mr Margaritelli added: “While everyone applauds the notion of people paying the correct tax, this is not the way to achieve that goal for the building industry.

“The real reason behind it is that the Government can hit companies with employers’ national insurance bills for all these contractors. All this will do is add costs for the building industry.

“Businesses, and the professional services that support them, want sensible legislation — not changes that could spell disaster.”