Construction company payroll outsourcing details come under HMRC’s spotlight: War on tax evasion accelerates

HMRC’s crackdown on tax evasion in construction is set to get even tougher in 2017.  The Revenue have confirmed they are now firmly focused on construction status and intermediaries risk. 

Details released under the Freedom of Information Act reveal a dedicated Employment and Intermediaries Unit that will: 

…work collaboratively with colleagues across HMRC – including Large Business and Fraud Investigation Service.  The unit will concentrate resource and expertise to consider status and intermediaries risk across a range of sectors including construction and those that provide labour to the construction industry.

Hudson Contract Managing Director Ian Anfield comments:  “HMRC’s clampdown on tax dodging is proving to be stunningly successful.  In 2015/16 alone, £248 million has been recovered – and the emphasis on rooting out evasion and fraud is clearly being expanded.”

New guidance notes – new obligations

HMRC has updated its advice about due diligence in choosing third-party providers.  Its latest guide says:  “We are committed to tackling non-compliance, fraud and illegal working practices so that we fund essential UK services.”

Construction firms that use freelance builders, CIS payroll companies and other labour providers must now ensure they:  

• Go online and give HMRC details of their payroll outsourcing arrangements, so these can be checked
• Understand and approve their supply chain, including where workers come from, how they are paid, and the legitimacy of these arrangements
• Ensure there is no modern slavery or illegal working in their supply chain

Ian Anfield warns:  “Be under no illusion.  Firms that fail to undertake these checks are likely to end up in hot water, risking even more than just their reputation.  If HMRC suspects a construction company or its third party provider of fraud, they will remove the right to recover VAT, and chase for unpaid taxes and National Insurance contributions, even if these have already been handed over to the third party.”

Business as usual for Hudson Contract clients

Our clients have nothing to worry about.  But if you have friends and contacts who use other labour providers, please advise them to check their supply chain compliance, in order to prevent guilt by association.  If there is any doubt, we will be happy to help and advise.

The full HMRC guidance update can be found here