HMRC’s yield from tax investigations into the construction industry fell 34% last year to £102m, down from £154.2m in 2014/15, says UHY Hacker Young, the national accountancy group.
The amount of additional revenue collected from HMRC investigations into the sector has fallen to its lowest level since 2011/12, having risen in each of the last three years.
UHY Hacker Young says that the construction industry has been a target sector for HMRC in recent years. HMRC has been trying to tackle the complicated issue of ‘disguised employment,’ where workers classed as self-employed are treated effectively as employees by construction companies.
UHY Hacker Young explains that a self-employed worker can pay less tax than someone who is on the book’ of a business as an employee. Those who are self-employed are permitted tax-free allowances for expenses such as travel costs, while companies are not required to pay costs such as National Insurance.
UHY Hacker Young says the clampdown may have encouraged more construction companies to convert workers to PAYE to avoid becoming a victim of HMRC’s crackdown on the sector. Construction workers converting from self-employed to PAYE could be a key driver of HMRC’s yield from investigations into the sector falling by over a third compared to last year.
UHY Hacker Young adds that HMRC has been targeting self-employment and the gig economy across the country’s workforce as a whole, with its focus on the construction sector proving particularly rewarding.
Roy Maugham, Tax Partner at UHY Hacker Young comments: “The construction industry seems to be getting the message after years of being targeted by the Revenue.”
“Companies could now have decided to avoid the chance of fines and lengthy investigations by ensuring more workers are paid through PAYE; but HMRC has long seen much of the self-employment in the sector as simply an artificial way to cut costs.”
“Construction has traditionally had a far higher proportion of self-employed and contracted workers because of its project-by-project nature.”
“Moving from job to job also means paperwork errors are far more likely from both the business and the individual.”
UHY Hacker Young explains that businesses must ensure they have all tax affairs and records in order – in case they face investigation by the Revenue.
Roy Maugham adds: “Despite the fall in yield last year, HMRC has been extremely successful in increasing their total revenues as a result of construction industry investigations and have showed no indication of easing the pressure on the industry yet.”