HMRC is said to be stepping up compliance checks on the construction industry – using its powers to investigate payments for off-payroll labour and gross payments to net paid subcontractors for plant and materials.
Bridlington-based Hudson Contract says it has seen a noticeable increase in HMRC activity and the deployment of what it cals ‘more aggressive tactics’ in recent months, with twelve companies seeking its support in the last six weeks alone.
The company’s Compliance Director Dan Davies said: “The firms concerned are groundworks, joinery, scaffolding and surfacing contractors located across England with turnovers ranging from £2m to £18m.
“HMRC has written to the companies with demands for information including schedule of payments to ‘all workers on a self-employed or off-payroll basis, a description of work undertaken by each worker, sample contracts and company handbooks, information used to determine employment status, details and costs of all materials supplied, evidence of third-party plant hire costs, and supply chain compliance
“In some of the correspondence, HMRC also enclosed an in-depth questionnaire, probing employment status and the categories of off-payroll workers engaged directly, through limited companies or via agencies, umbrella companies and managed service companies.”
Mr Davies said company directors often found the level of questioning to be invasive, ambiguous and a cause for concern, even when their books were in order.HE said: “The costs of getting it wrong can be significant. In one recent case involving a roofing company that engaged between 15 and 20 labour-only sub-contractors, HMRC hit the firm with a statutory income tax notice for more than £330,000 for just one financial year, another was handed a VAT assessment totalling £900,000 because of a tax loss in his supply chain.
“These cases show that HMRC is stepping up the enforcement of off-payroll working rules known as IR35, VAT compliance and general CIS and PAYE compliance issues such as paying net paid subbies gross amounts for plant and materials.”
