Loss could be even higher, according to construction union.
HMRC are missing out on almost £2 billion each year because of deception from within the construction industry, according to a new report.
Around 400,000 workers are falsely claiming they are self-employed, claims the study commissioned by construction union UCATT, and they are making illicit use of the Construction Industry Scheme (CIS).
Companies employing workers on CIS do not pay employers National Insurance contributions, while workers pay lower NIC and can enter tax returns to claim rebates. A company employing a worker on CIS and paying him £20,000 would save £2,560 in National Insurance contributions per annum, said the UCATT.
The report, entitled The Evasion Economy, estimates that there are between 375,000 and 425,000 construction workers falsely self-employed in Britain, denying the taxman £1.7 billion per annum (based on deception by 400,000 workers).
The document warns that the figures are conservative because the industry has become so 'casualised' that official data probably does not correctly record everyone working in the industry. It is highly likely that the annual tax loss by the Revenue is far greater, claimed the UCATT.
The union's report recommends that CIS, in which employer pays the tax of workers up front, should be abolished and replaced by a simple single category of self-employment in the construction industry.
Alan Ritchie, general secretary of the UCATT, said: 'It is quite clear that CIS cannot be reformed; the system has failed. It is now the responsibility of the Government to act decisively and rid Britain of bogus self-employment once and for all'.
