HMRC recovered more than £150m for the first time as a result of investigations into construction firms in 2014/15.
HMRC yield from tax investigations into construction
Source: UHY Hacker Young
Tax probes into the industry yielded a total of £154.2m, 17 per cent up on the previous year.
The amount the taxman has collected from the sector has more than doubled in the last five years, according to accountants UHY Hacker Young.
The firm cited “cash in hand” transactions and the prevalence of self-employed contractors and sub-contractors, as reasons the construction industry has become a primary target for HMRC.
UHY Hacker Young tax partner Roy Maugham said: “The construction industry is seen as an easy target by HMRC and has been subjected to 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.
“When this happens it’s more likely that mistakes or omissions might be made to paperwork or a worker’s tax status.”
HMRC has clamped down on the use of so-called ‘umbrella companies’, through which workers find work while still being classed as self-employed. It says that these are resulting in both the employer and employee paying lower National Insurance contributions.
UHY Hacker Young has warned contractors that HMRC may not accept that a worker is self-employed, even if the firm hiring them believes them to be so.
“Individuals and companies working in the construction industry must make sure that they have all the relevant paperwork otherwise they risk a high penalty from HMRC,” Mr Maugham said.
Commenting on the record yield from the sector, he added: “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.”