Builders in PAYE snare

Fears that Inland Revenue inspectors want to crack down on self-employed workers in the building industry have been realised in the last two months, according to tax experts.

Despite assurances from top officials at the Revenue, accountants across the country report that local inspectors are ruling against self-employed workers retaining their tax status in ‘nine cases out of ten’.

Accountants are refusing to apply to the Revenue for rulings on the status of their clients. They say that tax inspectors and Department of Social Security officials are pursuing an unofficial agenda to transfer most of the estimated 300,000 self-employed building workers into PAYE.

Chartered accountant Eric Tench headed a delegation from the General Practitioner Board of the English ICA to the Revenue earlier this month.

He said a meeting of small practitioners in the Thames Valley agreed that Revenue inspectors approached cases with a bias against self-employment.

‘They all said they would not seek rulings in advance as the Revenue goes against them every time,’ Tench said.

Richard Shooter, a partner at Henstock Shooter, agreed. He said that self-employed workers needed a cast iron case to retain their tax status.

‘Anyone in a grey area is classified as employed.’

Alistair Kendrick, senior tax manager at KPMG, said the Revenue’s tactics fuelled fears of a hidden agenda. ‘Revenue inspectors are driving a wedge into the contractual relationship between building companies and self-employed workers. They seem to have a mandate to move sub-contractors on to the payroll,’ he said. He added that, of more than 30 groups of small practitioners he had spoken to, all had experienced the same problem.

Tench confirmed that the GPB is collecting examples of rogue tax offices to take back to the Revenue.

Last year, the Revenue set 5 April as a deadline for building firms to assess the tax status of their sub-contractors – or face fines and claims for retrospective tax payments. It denied it had a hidden agenda.

A spokeswoman said: ‘The (self-employment) rules are standard across all industries. We’re just bringing the construction industry into line.’

But Kendrick said that the Revenue will face increased criticism unless it is more open about the criteria it is using.