“Bogus self-employment” in the construction industry is losing the government as much as £5bn a year, a parliamentary select committee has heard.
Alan Ritchie, general secretary at the Union of Construction, Allied Trades and Technicians (Ucatt), said a conservative figure of £2.5bn was lost to National Insurance contributions, while the knock-on effect of workers claiming to be self-employed cost an additional £2.5bn.
The construction union appeared before a panel of MPs to give evidence to the Department for Business Enterprise and Regulatory Reform’s (BERR) inquiry into the sector.
It estimates that one-third of two million people employed in the construction industry were bogusly self-employed on CIS4 cards
Workers registered as CIS4 are entitled to make a self-employed earnings declaration, from which they receive substantial refunds “for legitimate expenses” they have incurred.
“It’s a tax fiddle,” said Ritchie, who called on Inland Revenue to clamp down on bogus self-employment and encourage direct employment, a model used by British Airports Authority (BAA) on Heathrow Terminal 5.
He called the HM Revenue & Customs to perform much more stringent checks on whether workers really were self-employed before allowing them to be taxed under CIS. “Inland Revenue should take on some of these companies, there was a threat a few years ago and there was a move away from this, but when the threat didn’t materialise it started again,” he said.
Ucatt also renewed its call for the Gangmasters (Licensing) Act to be extended to the construction industry, to end the widespread exploitation of vulnerable, mainly migrant, workers.