The amount raised by the HMRC by targeting the construction industry is up 17 per cent to a record high of £154.2 million in the last year.
The amount collected from HMRC’s investigations in this sector has more than doubled in the last five years, according to UHY Hacker Young, a national accountancy group.
“False employment” in the construction sector, including cash in hand work and the high proportion of self-employed contractors, has made it the subject of increasingly intense investigations in the last few years.
Construction typically has a far higher proportion of self-employed workers and sub-contractors than most sectors, and they will often move jobs more frequently, according to Roy Maughan, Tax Partner at UHY Hacker Young. Errors are thus more likely to be made to paperwork or worker’s tax status.
"Even if a contractor believes themselves to be, or is classed as self-employed by other organisations, it does not necessarily mean that HMRC will accept this status,” Mr Maughan said.
UHY Hacker Young says omission might lead to up to six years’ worth of PAYE and National Insurance contributions, plus interest and up to 100 per cent of the tax in additional penalties.
“The increased yield from tax investigations and the new rules indicate just how much HMRC are clamping down on tax evasion in the construction industry, and this trend is likely to continue in the future,” Roy Maugham added.
“Most construction industry firms play by the rules and we are acting on their behalf by clamping down on the minority who don't," a HMRC spokesperson said.
The Office for Budget Responsibility (OBR) said in an analysis of progress in December last year that George Osborne’s plan to crack down on tax avoidance has fallen £600 million short of its heralded benefits.
Some problems with parts of the crackdown are “expected to continue in future years”, the OBR said.
