Construction probe yields results for HMRC

Investigations into the financial affairs of construction industry workers has led to an 18% increase in tax collections for HM Revenue & Customs.

According to a Freedom of Information request from accounting services group NoPalaver, the additional payments from electricians, builders and property developers rose to £78.9m for the financial year to April 2012 from £66.9m the previous year.

The figures represent the highest tax level in five years for the sector and compared with a 3% year on year decrease in the financial year ending April 2011.

Graham Jenner, director at NoPalaver said;

“Working arrangements in the construction sector are complex with self-employed subcontractors moving between jobs on a regular basis.  Irregular working patters like this create plenty of opportunities for errors with paperwork and tax status.  HMRC has dedicated teams to focus on tax compliance issues in the construction sector.  It’s one of the few industries to attract specific attention from HMRC.”

Gary Ashford at the Chartered Institute of Taxation was not surprised by the figures given the ‘huge investment’ into staff in the investigation team and the campaigns that HMRC had launched recently to raise the profile of investigations.  He also added that the arrest of tax evaders by HMRC was acting as a deterrent;

“Criminal investigations are starting to put a squeeze on the tax evasion market.  Once people hear about someone who has been arrested they are likely to think twice before evading tax themselves.”

A spokesperson from HMRC said that the figures showed that their strategy of focusing on the sectors of the economy posed the most serious risk of tax loss was proving highly effective.  They maintained that their strategy applied right across the board, irrespective of the size or nature of the taxpayer.

However, Graham Jenner argued that the compliance yield from the construction sector was very small compared with that from HMRC’s overall compliance investigations and questioned why they were spending time pursuing small contractors when it could be using it’s limited resources to investigate the tax affairs of larger corporations.

“HMRC likes to target the construction sector because a little bit of effort on compliance work often turns up extra tax revenue from contractors and subcontractors.”

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