Budget to spell bad news for construction industry

THE BUDGET will spell bad news for the construction industry if the Treasury presses ahead with plans to change tax rules for the self-employed.

Despite a negative response from the construction industry a recent update from the government shows that HMRC is set to tighten restrictions on the self-employed.

Many within the industry say the changes will catch out the genuinely self-employed, a point that HMRC denies.

HMRC is likely to impose three new indicators for construction workers to prove that they are self-employed: 

• They provide plant and equipment
• They supply materials
• They employ others.  

Chris Bond, a tax director at accountants and business advisers PKF in Birmingham, says HMRC has a bad track record on such changes.

“This is bad news for the whole construction industry so it is perhaps no surprise that it was released quietly before a politically charged Budget. But what is the point of consulting, if they are not going to listen to the industry?” he said.

“Once HMRC’s staff start to work to a new set of rules and guidance, they tend to use the strictest possible interpretation – this is bound to cause yet more disputes in what is already a complex area of tax law.”

Another proposal considered by the taxman is to use VAT registration as a further test of self-employment.

In a policy document HMRC states that “further consideration needs to be given” to it and to other possible indicators such as the provision of own transport and public liability insurance, submission of invoices and working for only one engager.

Mr Bond says HMRC has completely ignored the fact that such a test would unfairly discriminate against businesses that are too small to be VAT registered.

“The key issue is that HMRC still says that whatever tests are finally chosen, each must be capable of standing on its own – in other words, meet one test and you are self-employed,” continued Bond.

“This is an open invitation for those who want to bend the rules to do just a tick box exercise to remain self-employed.”