Construction union UCATT has hit back over concerns raised by the Recruitment and Employment Confederation on proposed changes to tax rules for construction sector workers.

HM Revenue & Customs has indicated that it is proposing to replace the current Construction Industry Scheme (CIS) tax scheme, so that agencies employing construction workers would have to pay national insurance, unless the workers qualify as self-employed by supplying their own equipment or plant, materials or other workers. “Deeming tests” would be introduced to clarify whether the worker is self-employed.

Currently, under CIS agencies can claim their contractors are self-employed so neither the agency nor the employer need pay national insurance contributions or holiday or sick pay.

The propsals if implemented would have the following impact:

• Employers who currently use subcontractors who are deemed to be self-employed and who don’t pay National Insurance will have to do so unless these workers are deemed self-employed according to the new tests.
• Agencies will have to pay National Insurance unless workers are deemed to be genuinely self employed.
• Employers who currently construction workers direct will continue to pay National Insurance.

Commenting on the proposed changes, Anne Fairweather, the REC’s head of public policy, said: “Many workers in construction are legitimately self-employed. Employment agencies offer them a route to find work. The Treasury and HMRC have indicated that they are considering a different basis for determining tax status in construction.  
 
“The REC has expressed concerns about whether the proposed deeming tests would work, and also fears that they could result in some genuinely self-employed workers being caught within employed taxation levels. The REC will continue to engage with the Treasury and HMRC on their proposals to ensure that flexible resourcing is maintained in construction.”

A UCATT spokesperson told Recruiter: “CIS is a huge tax break for employers and employment agencies and is unique to the construction industry.

“If there was not a financial issue with the Treasury’s proposals, I cannot understand why the REC would be opposing the changes.”