Net closes on bogus self-employmentÉ

by John d'Arcy



Top tax and accountancy experts are predicting that the government will move to stamp out bogus self-employment in the construction industry once and for all - possibly by introducing a legal definition of a "worker" or by slashing the financial advantages of self-employment.

John Whiting, tax expert at PricewaterhouseCoopers, told CJ: "It has to be on the cards. The IR35 regulations have been a very clear indication of the government's determination to tackle what it regards as unfair tax avoidance."

Liz Bridge, director of taxation at the Construction Confederation, said next spring's Budget is a likely opportunity for legislative action. The concept of a worker, as opposed to an employee, is already enshrined in the Working Time Regulations, she said.

Bob Blackman, TGWU national secretary, thinks the Treasury is aiming to introduce a threshold figure that would deny tax advantages to high earning self-employed. Those on CIS 4 who currently claim rebates would be denied these and are more likely to be hit with invoices for back taxes.

Bridge said that an initial switch to direct employment in the wake of the new CIS tax regime had been reversed. "We were told that the Inland Revenue would strictly police the new scheme," she said. "But it has become obvious that the Revenue cannot do what it said it was going to do.

"People have recognised that. And contractors have turned away from direct employment in the face of competition from those who risked staying with so-called self-employment."

She added: "Evidence from the Construction Industry Training Board (CITB) is that self-employment is now rising steadily. That is not healthy."

This was confirmed by a CITB spokesman. He said: "Latest figures from returns to April of this year show a 13.5% swing back to labour-only subcontracting.

"Over the last five years, there has been a 30% swing away from labour-only to PAYE. But that swing peaked at 40%."