On the eve of the budget, Construction Union UCATT has labelled the Construction Industry Scheme (CIS) as not fit for purpose.

When CIS was revised in 2007 it became the responsibility of the employer to correctly register workers under the scheme. Employers were told that they would be fined if they wrongly recorded the employment status of workers.

Despite this the HMRC are unable to provide any information regarding how many companies have received fines for wrongly recording the employment status of construction workers.

The issue of correctly recording the employment status of construction workers is crucial, given the severe problem of false self-employment in the construction industry. The Great Payroll Scandal by Jamie Elliott, recently produced for UCATT, found that false self-employment was affecting 400,000 construction workers and was costing the Exchequer £1.9 billion a year in lost tax revenues.

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When UCATT asked a Freedom of Information request on how many fines had been issued by HMRC for wrongly recording employment status the union was told: "HMRC holds information within the scope of your request but because our employer compliance information technology system is not configured to associate a penalty amount with a particular type of failure, I am unable to furnish this information to you."

When Natascha Engel Labour MP for North East Derbyshire asked a similar Parliamentary Question she was told: "The information is not available and could be provided only at disproportionate cost."

These answers differ from a previous parliamentary question which indicated the information was available. Former Labour MP Michael Clapham received an answer to his question regarding fines for wrongly recording employment status under CIS on 31st January 2008. The then Financial Secretary to the Treasury Jane Kennedy said: "At present, no instances have arisen where penalties have had to be imposed because of an incorrect declaration of employment status by a contractor."

On further investigation UCATT found that while the information on the HMRC website informed contractors that they needed to correctly register workers for the CIS scheme, the warning that they could suffer a "penalty" if they failed to do so was not prominent and no figure was placed on the potential sign of the fines.

Steve Murphy General Secretary of UCATT, said: "Once again it is clear that CIS is not fit for purpose. It would seem that companies can wilfully ignore the rules on employment status without penalty and HMRC is not pursuing them. False self-employment in construction is endemic in the industry yet HMRC is not taking the issue seriously."

(CD)