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Revenue to set 714 exemption turnover limit

CONSTRUCTION workers earning less than 30,000 could be taken out of the 714 tax exemption system.

Officials at the Inland Revenue are near to setting the minimum turnover level for labour-only subcontractors.

Documents obtained by Construction News show the figure will be at least 20,000 and could be as high as 30,000.

The turnover test and tax changes will come into effect in 1998, when the Inland Revenue is having a huge shake-up to shift most 714 holders on to the SC60 system or back into direct employment.

Workers currently using 714 vouchers are paid gross of tax, which is paid annually. Under the SC60 system, workers automatically have 24 pence in the pound deducted at source.

Inland Revenue chiefs are pushing through the changes because of huge losses in unpaid tax bills.

The document states: The purpose of the turnover test is to provide an objective test of substantial business operations.

Our intention is to try to identify, as far as possible, the level which most closely matches this type of business, yet prevents labour-only subcontractors from getting a 714 certificate.

Industry experts believe the Revenue is setting the mark too low.

General union GMB national construction organiser Allan Black said:' The figure is a bit low, but they are clearly determined to rid the industry of this practice. This will be a huge change for construction workers and there is no way the industry is prepared and ready for it.'

People renewing their 714 vouchers now will not be given the usual three- year forms.

The certificates will be valid only until the changeover date in April 1998.

The switch could prove a bonanza for accountants faced with construction workers looking to circumvent the legislation.

One team of accountants is already working on an offshore registration scheme, which could provide a loophole.

And accountants are also citing the examples of the computer and film industries, where similar tax changes led to a rash of individuals setting themselves up as businesses.