CIOT urge government to rethink proposals to subject building contractors to PAYE deductions

The Chartered Institute of Taxation (CIOT) is calling on the government not to go ahead with plans to tax many self-employed construction workers as employees.

The call is made in the CIOT’s response to the HM Treasury and HM Revenue & Customs (HMRC) consultation document ‘False self-employment in construction: taxation of workers’. The paper suggests there is a serious issue of ‘false self-employment’ in the construction industry. The proposed solution is to deem workers within the industry to be in receipt of employment income for tax purposes, unless one of three set criteria is met.

The CIOT believes HMRC has the necessary powers to tackle false self employment, where it exists, and should use them. The proposed new procedures will catch many whom the Courts have held to be self-employed and do so only for tax purposes, whilst failing to address the issue of employment rights.

Colin Ben-Nathan, Chairman of the CIOT’s Employment Taxes Sub-Committee, said:

“The CIOT is very clear that HMRC should apply the toughest sanctions to those involved with deliberate falsification and evading tax and NICs.

“But rather than adding further legislation, there needs to be more effective enforcement of the existing rules. The Government should be directing greater resources towards enforcement and, where there is evidence of abuse, crack down hard on evasion.

“We are very concerned that the consultation is only about ‘how and when’ legislation is to be introduced and does not address the underlying reasons for the perceived problem and, in particular, by only considering the tax situation it does not address issues such as lack of employment rights and benefits. We are also concerned that the proposed measures will have an adverse impact on many who are genuinely carrying on a business.

“The CIOT considers that, to the extent that the problem is one of evasion of tax, no amount of refining of the legislation will prevent those determined to do so from flouting the rules. We have always taken the view that the way to deal with evasion is to bring those concerned to account, apply due sanction and make an example of them to others.”

For further information – George Crozier on 020 7340 0569 or email gcrozier@ciot.org.uk

Notes

1) The HMRC consultation document ‘False self-employment in construction: taxation of workers’ was issued by HMT in July 2009. It is available at http://www.hm-treasury.gov.uk/consult_false_selfemployment_construction.htm. The consultation document does note that the economic downturn has had a significant effect on the industry and that therefore the measures ‘will take effect when the industry is in a stronger position’.

2) The CIOT’s response to the consultation is available here

3) The Chartered Institute of Taxation (CIOT) is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT’s primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it – taxpayers, advisers and the authorities.

The CIOT’s comments and recommendations on tax issues are made solely in order to achieve its primary purpose: it is politically neutral in its work. The CIOT will seek to draw on its members’ experience in private practice, Government, commerce and industry and academia to argue and explain how public policy objectives (to the extent that these are clearly stated or can be discerned) can most effectively be achieved.

The CIOT’s 14,900 members have the practising title of ‘Chartered Tax Adviser’.

George Crozier
External Relations Manager

D: +44 (0)20 7340 0569
M: +44 (0)7740 477374

The Chartered Institute of Taxation
Registered charity number 1037771
www.tax.org.uk