CJ Construction Blog

HM Revenue & Customs' attempt to raise £350m by pushing what it sees as falsely self employed workers into employee status raises several important questions.

It will undoubtedly drive up costs by the 12.8% NIC contribution contractors make for their PAYE staff.

But does it really end there? Out-of-pocket workers will not easily accept a fall in take-home pay, even if it is blamed on the Revenue. The fact is that they may reluctantly accept some erosion of wages but somebody will ultimately have to make up the shortfall in take home pay. Whether this is the contractor or client will be the source of heated debate.

Beyond that the proposals are splitting the industry along unfamiliar lines. Firms that typically directly employ argue the move puts everybody on an equal footing for the first time

This is a compelling argument, but it is not as clear cut in reality. The wet trades will feel the pinch more than building services contractors. Whether everybody will really be on a level footing in the eyes of tax inspectors is another thing.

If past experience is anything to go buy, it is the firms who pride themselves on trading legitimately and belonging to trade associations that will come under closest scrutiny. They are the easiest to find and visit. The real rogue traders out there will just disappear and set up under a new name.

But there is a bigger question on many people's lips and that is why is construction being singled out from all other parts of the UK economy in the first place?

The new law is only being applied to construction, which is also one of the hardest hit by the downturn.

The answer may lie in the proportion of the workforce that is self employed, 34% against a UK industry average of 11%. This is something that sticks in the craw of Government.

It is high-time the Government recognised that construction remains a largely transient industry, where workers move from one job to another, often travelling to other parts of the country. The industry also suffers dreadfully as the economy swings from boom to bust which means in times like these contractors need flexibility to survive.

Piloting the new tax law in construction is not just bad timing, it is simply a bad decision. This is no time to burden construction with extra costs and the havoc a shake-up in worker tax status inevitably causes.