HMRC (Revenue & Customs) is cracking down on tax avoiding workers and their employers in the construction industry.
They are trying to be nice about it by initially assuming anyone employing illegal workers is doing so innocently. But, in spite of all the public sector cuts, the Government has given the Revenue £900million to tackle the issue of illegal workers and expects to recoup more than half of that sum in additional tax.
To achieve its target, the Revenue has doubled the number of officers checking on labour-only contractors. That puts an extra 100 tax officers out there willing, as HMRC gently puts it, to “offer you a free health check to help you use legitimate labour providers and tackle fraud within the industry”.
But however gently it is presented, the aim is to bring in an additional half a billion pounds of tax over the next four years. And, the Revenue warns, labour providers found guilty of tax evasion face jail.
The Revenue is also increasing the penalties faced by contractors who fail to fill in their CIS (Construction Industry Scheme) returns, or submit them late.
The new penalties come into force in November – and professing ignorance of them will not protect you from them.
The first returns affected by the changes will be for the month ending on 5 November.
From that date the following penalties will apply:
- as soon as the return is late – a fixed penalty of £100
- two months after the filing date – a second fixed penalty of £200
- six months after the filing date – a tax-geared penalty which is the greater of £300 or 5% of the amount of deductions shown on the return
- 12 months after the filing date – a second tax-geared penalty which is the greater of £300 or 5% of the amount of deductions shown on the return.
If HMRC believes information has been deliberately withheld, greater penalties will be imposed. And don’t forget: HMRC charges interest on any penalty amount paid late.
When the new penalties come into force, no more automatic penalties will be issued for outstanding returns up to and including the one for the month ending 5 October. Those penalties already charged still need to be paid unless they have been successfully appealed against. Payment of these should be made immediately.
To avoid penalties, file your returns in good time (ie to reach HMRC by the 19th of the month) and tell HMRC immediately if you stop trading or do not pay subcontractors in a particular period.
Information will be posted on the HMRC website and a letter will be sent to all CIS contractors in September.