The central problem is that the new rules are a pretty blunt tool, designed in part to club people working through intermediaries and claiming expenses for travel and subsistence. However, even if your only tool is a hammer, not all your problems are nails. The construction industry has always had unique employment needs, and now companies are getting caught up in a regulatory framework that's trying to bash a square peg into a round hole.
The main effect of all this is pretty clear from the figures recently released by accountants UHY Hacker Young. The new crackdown has seen more and more construction industry firms struggling under the weight of justifying the self-employed status of their workforce. Revenue from increasingly aggressive inspections has leapt up by 17%, and is now more than twice what it was five years ago. That stacks up to an astonishing and record-breaking £154 million.
Not nearly enough has been done to communicate with businesses and explain their obligations under the new scheme, such as providing quarterly reports explaining why workers on their payroll are not PAYE. As a result, many are now in serious danger of getting unexpected and very unwelcome PAYE and National Insurance bills. Keep in mind that these bills could stretch back for years, gathering interest and eye-watering penalties along the way. Failing to provide the correct paperwork could risk paying up to six years’ worth of PAYE and National Insurance contributions, plus interest and up to 100% of the tax in additional penalties. Now more than ever, it's vital for construction firms to make sure all their paperwork is up to date and organised.
It's no easy matter to keep a business within rules that were never designed to suit any one sector, and these inspection revenue figures from HMRC are proof of that.