The cost of PAYE compliance

One subcontractor, who wished to remain anonymous, contacted CJ to complain about his experiences of CIS4.

"A few years ago I moved all my employees on to PAYE, but now I can't compete with firms which only use CIS4 labour. The crazy thing is that having moved my employees over from the old 714 self-employed system to PAYE, the Inland Revenue is now demanding I prove that my employees were genuinely self-employed in the years previous to switching over to PAYE. If I can't prove it, I'll have to pay out their National Insurance contributions and my employer contribution.

"At the same time the Revenue is handing out CIS4 cards like they are going out of fashion. Instead of checking whether these people are genuinely self-employed when they give out the cards, the Revenue expects the industry to do it for them and then hounds employers to prove that prior to PAYE all employees were genuinely self-employed. I'm sick of it.

"It's a massive problem. It's hard for me to recruit because I insist my employees are on PAYE. But there is such a shortage of skilled labour that operatives can just say: 'Forget it, I'm going to work for the guy next door who'll take me on as a CIS4'.

"It's making me uncompetitive. On one job I went for, once I'd factored in the employer's National Insurance contribution, sick pay, holiday pay and all the rest, I'd have to pay people around £28 an hour. But rivals using CIS4-only labour are having to pay only £20 an hour - all that's being deducted is the 18% tax. That's a massive difference. Once I factor that up for my entire labour force there is no way I can compete on price with firms running CIS4-only labour."