Building a false economy

A report published this week claims that tax evasion through false self-employment in the construction industry is costing the UK £1.7bn a year.

The study by Professor Mark Harvey of Essex University calculates that there are between 375,000 and 425,000 workers falsely self-employed in the UK construction industry. Their employers pay no National Insurance (NI) contributions, while the workers themselves pay lower NI contributions and can claim special tax rebates.

Professor Harvey explained: ‘False self-employment is adopted as a device to reduce tax liabilities and employer responsibilities. It occurs through the Construction Industry Scheme (CIS), a self-employment tax scheme peculiar to the construction industry. Unlike genuine self-employment workers they are paid wages rather than work for a client under contract, have set hours of work and have tax deducted at source.

‘The UK construction industry has been characterised by high levels of false self-employment for several decades but recently this level has risen significantly.’