Tax investigations into the construction industry netted the HM Revenue & Customs (HMRC ) £147m last year – up from £102m the previous year – according to a new study released today.
The research by accountants UHY Hacker Young found that mistakes or omissions in a worker’s tax status or paperwork could lead to more penalties for construction firms.
The accountants added that the sector remains a main target for HMRC due to the “cash in hand” nature of the industry and the large proportion of self-employed contractors and sub-contractors.
The Construction Industry Scheme (CIS) – as part of which contractors deduct money from a subcontractor's payments and pass it to HMRC - has also led to the increase in penalties.
UHY Hacker Young said: "Under the scheme, should companies or individuals who are investigated by HMRC not have the relevant paperwork they might have to pay up to six years’ worth of PAYE and National Insurance contributions, plus interest and up to 100 per cent of the tax in additional penalties."
Andrew Snowdon, tax partner at UHY Hacker Young, added: “HMRC’s tolerance for errors on the part of CIS has reduced even further. Individuals and companies working in the construction industry must make sure that they have all the relevant paperwork otherwise they risk a harsh penalty.”
“Construction typically has a far higher proportion of self-employed workers and sub- contractors, and they will often move jobs more frequently. When this happens it’s more likely that mistakes or omissions might be made to a worker’s tax status or to paperwork.”
“Even if a contractor believes themselves to be, or is classed as self-employed by other organisations, it does not necessarily mean that HMRC will accept this status.”