Inland Revenue doubles its construction tax inspectors

The Inland Revenue (IR) is doubling the number of staff allocated to policing the correct employment status of construction operatives for tax and National Insurance purposes.
More stringent compliance measures come in tandem with the new campaign to persuade the industry to review the proper employment status of its workers (CJ 11 August).
Letters from the IR were sent out last week to 13,000 contractors and 44,000 subcontractors asking them to check current employment status. A second tranche of letters is set to go out in spring 2005, bringing the total number to 114,000.
Revenue policy assistant director John Hinton said: "It is clear from representations made by members of the construction industry and trade unions to the IR that not all contractors are meeting their responsibilities on employment status. Industry representatives have understandably complained that this creates unfair competition between those meeting their responsibilities and those that are not."
Hinton said that the letters were targeted at those who
may be at risk of getting employment status wrong.
"The message is that the industry has to take the question of employment status seriously," Hinton said. "What we have been doing is to look at the information we get under the present construction industry tax scheme. It is not a scattergun approach. We have been looking for patterns of engagement. We get a lot of information through the vouchers.
"We are saying to those receiving letters that there is prima facie evidence that their workers may not be self-employed. It doesn't mean that they are all necessarily employees. But we are asking them to check. There are genuine misconceptions."
Pamela Mulholland, IR employment status policy adviser, added: "If you don't get a letter, it doesn't mean that you are in the clear. All should check on employment status."
Hinton emphasised that the IR would follow the practice of the courts and employment tribunals in defining employment status. "We will not just look at the written form of contract," he said. "We will look at the real practical arrangements which underlie it."
Robin Wythes, employer compliance team leader, said the IR is also doubling the number of staff ready to advise on employment status. Firms or individuals could either contact their own consultants or go direct to the IR for advice.
Hinton said the legal obligation to get it right remains with the contractor rather than the subcontractor. It is particularly important for contractors to act now - before the new construction industry tax scheme is introduced in April 2006.
That will impose an obligation on firms to make monthly declarations of the employment status of their workers with penalties for those who misdeclare.
Hinton concluded: "We will very carefully monitor the response to these letters. If they are not effective, one option is to increase compliance procedures next year."