714 turnover test postponed

Changes in the Inland Revenue's construction industry tax deduction scheme - which were expected to come into force from 1 August 1998 - are to be postponed for at least a year.

But the move will not affect the current IR clampdown on bogus self-employment which some claim may inflate labour rates by more than 20 per cent.

The main change in the tax scheme is the introduction of a turnover test for those seeking to qualify for a 714 tax certificate. At current rates the turnover threshold would be in the range of œ20-30,000 a year. This in itself is expected drastically to reduce the number of operatives on the 714 system. Identity cards for those on the SC60 system are also planned.

The Inland Revenue said the main reason for putting back the revised 714 procedures is to allow a greater interval between that change and the introduction of the new tax self-assessment procedures, which will have an equally big impact on construction.

A date for the start of the revised tax deduction scheme will be announced early in the new year, but "it will not be before 1 August 1999."

An IR spokesman commented: "This is a very different issue from the guidelines we have recently published on self-employed status and the ongoing audit of operatives that is being carried out nationwide."

That audit is being carried out in conjunction with the National Insurance Contributions Agency and is already prompting a major shift in site employment patterns.

Simon Bellm, a partner in the employment law division of Sussex lawyers Donne Mileham & Haddock, has commented that early estimates that the ensuing switch back to direct employment could put 10-20 per cent on labour costs may prove an understatement.

"The mass of employment legislation will come as a surprise to many contractors who have previously been able to ignore issues such as contracts of employment, disciplinary procedures, redundancy selection, maternity laws, and notice rights," he said.

Former Ucatt official John Flavin is spearheading a campaign for contractors to be given more time to adjust to the change in employment practice.

"I am not against the change," he said. "It will be good for training and for safety. But the way they are going about it is ridiculous. The CDM safety regulations were postponed twice. So why not give industry more time to cope with this initiative?"