Inland Revenue 30
17 March 1998
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LABOUR SUPPLY IN THE CONSTRUCTION INDUSTRY
The Chancellor has announced a change in the law in the next
Finance Bill which will mean that construction workers whose
services are supplied by employment agencies or other third
parties will normally be taxed as if they are employees.
This change will bring their tax treatment into line with that
of other workers who supply their services through employment
agencies or others, and is part of the Government's
commitment to achieving a fair tax system.
The change will also help to align the tax and NICs treatment
of construction workers who supply their services in this
way, and should help to streamline the administrative
procedures that employment agencies and others use when
engaging and supplying such workers.
The change will take effect from 6 April 1998.
DETAILS
1. Employment agencies and others who supply labour are
normally responsible for operating PAYE on payments they make
to the workers whose services they supply. This
responsibility does not presently cover payments made to
construction workers.
2. From 6 April 1998, employment agencies and others who
supply workers to the construction industry will normally be
required to operate PAYE on payments they make to
construction workers in the same way as for other workers
whose services they supply.
3. Employment agencies and others already have a similar
obligation to account for employer and employee NICs because
DSS regulations which govern the treatment of workers
supplied by employment agencies and others do not contain any
exemption for construction workers.
NOTES FOR EDITORS
1. This change was announced by the Financial Secretary to
the Treasury, Dawn Primarolo MP, on 31 July 1997. Draft
legislation prepared for the 1998 Finance Bill to implement
the change was published on 9 February 1998. The legislation
will be given effect in advance of Royal Assent to the Finance
Bill by way of a Resolution under the authority of the
Provisional Collection of Taxes Act 1968.
2. This change is one of a number of steps that have been
taken to address concerns expressed by construction industry
representatives that some areas of the industry have been
obtaining a commercial advantage by entering into
arrangements which do not require the operation of PAYE.
3. The new requirement to deduct PAYE will potentially
affect all those within the construction industry who supply
construction workers to others, as opposed to carrying out
work for others using their own labour or workforce. Examples
of those affected will include :
High Street employment agencies;
specialist construction industry employment
agencies;
companies within a construction industry group who
supply labour to others within or outside that
group (`in house' agencies);
anyone else who supplies construction workers to
others (as opposed to supplying a service using
their own work force).
4. A construction worker who receives income from an agency
or other third party from which PAYE has been deducted will
need to complete his or her 1998-9 tax return as if this
income came from an employment.
5. General help and advice about the change are available
from the Employers' Helpline (0345 33 55 88) and from all
local tax offices.
6. It is estimated that 40,000 workers in the construction
industry will transfer to PAYE as a consequence of the change
in the law. It is expected that this will bring forward tax
yield of 10 million pounds from the year 1999-2000 to 1998-99.
INLAND REVENUE PRESS OFFICE
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