HMRC has taken a record £122m in extra tax from workers following a crackdown on false self-employment in the construction industry.
This is an increase of 55% on the £78.9m taken in 2011-2012, according to figures released by accounting services company NoPalaver Group.
False self-employment in the construction sector is said to be a long-standing concern for HMRC, particularly given the rise of contractors within this industry. It allows companies to avoid paying PAYE taxes and to withhold worker benefits, such as pensions and redundancy.
Graham Jenner, director at NoPalaver, said the industry is “not always exemplary in keeping administrative records” and it can therefore be difficult for businesses to prove that workers are genuinely self-employed. This causes suspicion from HMRC.
“This is a pity. The flexibility provided by self-employed status is one of the ways both businesses and workers in the construction sector have remained competitive through an extremely challenging period for the industry.”
Businesses found to be engaging in the practice will be liable for the full amount of unpaid tax and national insurance contributions, as well as any additional financial penalties.
A report by economia said HMRC is pursuing a strategy involving an “increasingly aggressive approach” towards smaller scale fraud. According to the research, HMRC has become “increasingly draconian” in its treatment of contractors in the construction industry.