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£26m bill as tax rules bite

Inland Revenue steps up bogus self-employment drive n Crackdown set to intensify

INLAND Revenue chiefs have collected £26 million in extra tax from thousands of contractors following the latest crackdown on bogus self-employment.

Construction Confederation figures seen by Construction News highlight how the Revenue is coming down hard on companies across the country.

The added tax bills followed in the wake of 13,000 letters sent out to contractors last October asking them to check the employment status of subbies.

The confederation said 4,300 firms received follow-up visits from the Revenue.Three-quarters of them were found to be wrongly classifying employees as self-employed workers, resulting in an extra £26 million in tax demands.

Confederation leaders are warning that the crackdown is set to intensify with more warning letters and even tighter qualifying criteria for genuine self-employed workers.

A confederation spokeswoman said: 'Not surprisingly, the revenue is continuing with these follow-up visits and have plans to issue another 13,000 letters to newly selected contractors next month.

'This is a serious compliance campaign which has been well resourced.Our advice is to review your subcontractors and move all the 'doubtful' ones into employment - this may be enough to prevent a follow-up visit.'

Tougher criteria being considered to identify self-employed workers include checking that subcontractors are VAT registered, that they trade using a business bank account and have valid public liability insurance.

The spokeswoman said: 'Clearly this would stop the majority of labour-only subcontractors being paid as CIS workers and would have heavy costs for all employers who currently use labour-only subcontractors.'

But some tax experts have cast doubt on the confederation's figures. Alastair Kendrick, director at accountant Ernst & Young, said: 'I don't see any evidence of widespread enforcement by the Revenue. I have a major concern that companies may be moving people to employees when they are not.'

A Revenue source said: 'What we are after is the right amount of tax with the least hassle.'

grant. prior@construct. emap. com