Massive drop in PAYE deducted from construction workers

A report recently released by HMRC shows that the percentage of the total PAYE tax received by HMRC for the construction sector fell significantly in the year between 2009/10 and 2010/11.  The statistics, based on an analysis of HMRC’s internal PAYE computer systems, show that consistently more than 5% of all PAYE collected came from construction over the last decade – however between the 2010 and 2011 tax years the percentage nose-dived from 5.3% down to 4.3%.  This may be in part due to the economic downturn, although the recession would also have affected other industries, if not as hard, so proportionately this ought not to have made much of a difference.  But the drop in PAYE may also be attributable to the resurgence of self-employed construction labour. Statistics previously released by HMRC indicated that the effect of the new Construction Industry Scheme on small contractors was that 13% had switched to solely using self-employed labour – hardly the anticipated effect of the new scheme.

As ever, it is important to ensure that any self-employed labour is engaged under a genuinely agreed written contract for services.  If you or your clients need advice – call our team.