Region’s construction businesses could miss out on Olympic gold rush, says expert


08-02-2008

Reforms by the HM Revenue and Customs (HMRC) designed to shake up the construction industry’s tax regime, which were introduced in April 2007, could have far-reaching effects for the region’s construction businesses looking to cash in on The Olympics’ gold rush.

his warning has been made by Ernst & Young’s newly appointed construction employment tax specialist, Alistair Gibson, who says the changes to the Construction Industry Scheme (CIS) - which is the mechanism through which HMRC attempts to ensure tax compliance by the thousands of sub-contractors which operate in a typically cash based sector - are still catching contractors out and may ultimately result in them missing large scale tender opportunities.

Mr Gibson said: “In addition to the heavy penalties that companies have to pay by not operating CIS correctly, there is the added pitfall that they may miss out on major public construction projects.

“This is no more pertinent than now, as the UK prepares for the biggest sporting event it has ever hosted – The Olympics in 2012. Potentially this offers construction contractors major opportunities but without their back office in order, in terms of correctly declaring the employment status of the sub contractors they employ, they may fall foul of the revenue and ultimately lack the physical numbers of subcontractors to be able to complete large scale tenders.”

Under the CIS, contractors have to verify that all new subcontractors are registered with HMRC, and they will have to demonstrate that the employment status of each contractor has been reviewed each month, and provide HMRC with a monthly return detailing every payment to every sub-contractor plus payment statements to each sub- contractor.

Continuing, Mr Gibson said: “This could not only harm the construction industry as a whole, as major tenders are lost through lack of man power, but with the Mayor of London having already stated that he expects all contractors to use directly employed labour on the Olympic site, it could in fact delay its progress.”

Mr Gibson, a Senior Manager recruited from Grant Thornton, will lead the firm’s new CIS team from the Cambridge office of Ernst & Young. He joins a team of seven employment tax specialists in Cambridge covering all aspects of employee taxation and remuneration including global mobility, performance and reward and employment tax consultancy.

The Cambridge office of Ernst & Young provides corporate tax, transfer pricing, transaction advisory tax, capital allowances and human capital; headed by tax partner Cathy Taylor.

Commenting on Mr Gibson’s appointment Mrs Taylor said: “Alistair is a tax professional, with over 10 years experience in employment tax. His knowledge of CIS and employment tax in this sector is well recognised. I am delighted he has joined the team and is a great addition to the firm.”

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For further information please contact


Adam Holden

Ernst & Young Media Relations

Tel - 0121 535 2128

Mob - 07917 000028

Email - aholden@uk.ey.com

 

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