Construction union UCATT have written to Lesley Strathie the Chief Executive of Her Majesty's Revenue and Customs (HMRC), requesting an urgent investigation into the conduct of employment agencies who are deliberately avoiding paying millions of pounds in taxation when employing construction workers.

In recent years there has been a huge growth in employment agencies/gangmasters operating in the construction industry. Construction companies are increasingly using agency workers in order to avoid paying: holiday pay, sick pay and other benefits. Agency staff are often the most vulnerable workers and open to exploitation in what is a highly casualised industry.

In order to boost profits employment agencies are increasingly requiring construction workers to work via the Construction Industry Scheme (CIS). CIS is considered a form of self-employment and therefore the agencies do not have to pay employers national insurance contributions of 12.8% per worker. Given the scale of the problem this translates into millions of pounds of lost revenue per annum.

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UCATT has discovered that in many cases employment agencies offer two rates for the same job. A higher rate paid via CIS and a lower rate paid PAYE.

Alan Ritchie, General Secretary of UCATT, said: "UCATT are seeking an urgent investigation into how employment agencies are lining their pockets and denying the Exchequer vital revenue through the misuse of the CIS tax scheme. This is a classic case of bogus self-employment on a massive scale."

The HMRC has clear rules about whether workers should be paid directly or via the CIS tax scheme. These relate to the employment status of the workers involved and the true working relationship between the employer and the worker. The suggestion that a worker employed through an employment agency can choose their hours, decline work, does not have to obey orders and sets their own prices for work, is simply not credible when considering the working relationship of agency workers operating in construction.

The financial advantages for agencies using CIS to pay workers is also demonstrated by the decision of the Recruitment and Employment Confederation (REC), the largest trades association for employment agencies, to back the sub-tax campaign.

The sub-tax campaign is an alliance of housebuilders and some other construction companies, who are opposed to Government proposals to reduce endemic bogus self-employment in the construction industry by introducing "deeming". The introduction of deeming would result in the majority of bogusly self-employed workers being deemed employees for taxation purposes.

Mr Ritchie, added: "The comments by a senior representative of REC demonstrate a blinding ignorance of the construction industry and are deeply worrying. Workers don’t freely choose to be bogusly self-employed so that they can be stripped of holiday pay, sick pay and basic employment rights. They have to accept these employment conditions in order to find work and feed their families."

(CD/GK)