HMRC has increased their income tax collection by 18% due last year from investigations into the construction industry. Revenues increased from £66.9 million to £78.9 million for period ending April 2012.
Compliance issues have caught out many self employed builders and contractors as they grapple with administering the construction industry scheme. This sector, which includes builders, plumbers and developers, is renowned for having a highly mobile workforce as they move from job to job.
HMRC has beefed up their investigation section and the construction industry is seen as an easy target. If they find issues at one company, they can then trace that back to a stream of contractors and subcontractors for overdue payments. In some cases, if they can prove deliberate acts of fraud, then criminal proceedings will then be pursued.
The construction Industry scheme was introduced to deduct payments made by contractors to sub contractors. The administration of the PAYE was not seen as sufficient to keep up with a fast moving workforce so the CIS system simply deducts 20% off any payments made to any registered sub contractor engaged in the building industry. If a contractor engages an electrician or a plumber then 20% would be deducted from their payments. If the back office administration of companies are not capturing all the information regarding these projects, they run the risk of falling foul of the tax regulators. Companies in this field need to be able to show they have adequate systems in place to keep up with the paper trail of all individuals they have working on site.
HMRC are becoming more robust as there are more constraints on public finances and the investigation teams are incentivised to get results.
