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HM Revenue & Customs warns that it will be examining construction projects linked to the Olympic Games for Tax, National Insurance or National Minimum Wage issues.

Introduction

Companies working on construction projects for next summer’s Olympic Games are warned that HM Revenue & Customs (HMRC) will crack down on Tax, National Insurance or National Minimum Wage breaches.

Mike Eland, HMRC’s Director General of Enforcement and Compliance, said:

“We aim to help contractors and employers understand their responsibilities and comply with their obligations but we will also catch and deal with those who deliberately break the law. This is only fair to those businesses who do play by the rules and want to compete on a level playing field.

The Olympic and Paralympic Games represent a great opportunity for UK companies – but they must at the same time meet their tax and employment obligations.

Only those who choose to break the rules, or deliberately evade the tax they should be paying, will be targeted. Honest businesses have absolutely nothing to worry about.

But the message is clear – if you deliberately seek to evade tax, HMRC can and will track you down and you’ll face not only a heavy fine but possibly a criminal prosecution as well.”

Areas HMRC will Target

HMRC will target contractors and employers who:

•  do not correctly classify the employment status of their workers;
•  do not deduct and account monthly for PAYE and National Insurance;
•  do not deduct and account monthly for deductions under the Construction Industry Scheme(CIS) ;
•  avoid paying the National Minimum Wage; and
•  fail to meet their obligations to file statutory CIS  or PAYE returns.

If they are late paying PAYE or CIS deductions, interest and penalties can be charged. Late or non-filing of monthly CIS returns by contractors can also lead to penalties. And breaches of NMW legislation can result in an unlimited fine and criminal record.

In addition, falsely classing workers as “self-employed” to avoid tax, National Insurance or NMW can result in severe financial penalties.

Notes

1. There are some 34 Games venues, including in London, Coventry, Windsor, Essex, Glasgow, Lee Valley (Herts), Cardiff, Manchester, Newcastle and Weymouth and Portland (Dorset).
2. Employment status is determined by the terms under which a person is engaged, not by the wishes of the employer or worker. Where the worker is engaged under employment terms, the engager must deduct PAYE and National Insurance contributions and ensure that pay rates conform to at least the National Minimum Wage. Engagers can establish whether their workers are employed or self-employed by using HMRC’s Employment Status Indicator - at Employment Status Indicator. 
3. HMRC compliance teams consider carefully the true terms under which workers are engaged to ensure that workers are not being falsely classified as “self-employed” in order to avoid the engagers’ statutory obligations. Where workers have been incorrectly classed as self-employed, engagers can in addition to penalties and interest be liable for the tax and National Insurance which should have been deducted.
4. HMRC enforces the National Minimum Wage on behalf of the Department for Business, Innovation and Skills. Details of current National Minimum Wage payment rates can be found at National Minimum Wage.
5. Anyone who thinks they are not being paid the National Minimum Wage or has concerns about an employment agency or business can call the Pay and Work Rights Helpline on 0800 917 2368  in confidence.
6. The six potential criminal offences under section 31 of the NMW Act are:

• Employer refuses or wilfully neglects to pay NMW;
• Person fails to keep or preserve records;
• Person knowingly causes or allows false entry in records;
• Person produces or furnishes false records or information;
• Person delays or obstructs compliance officer;
• Person refuses or neglects to answer any questions or produce;
• Documents for compliance officer.

Each criminal offence carries an unlimited fine and a criminal record.

7. Current National Minimum Wate rates are as follows:

• The main rate for workers aged 21 and over is £5.93 an hour.
• The rate for 18-20 year olds is £4.92 an hour.
• The rate for 16-17 year olds is £3.64 an hour.
• An Apprentice Minimum Wage of £2.50 an hour applies for apprentices under 19, or apprentices aged 19 and over but in the first year of their apprenticeship.  

8. From 1 October 2011 the rates will be:

• the main rate for workers aged 21 and over will increase to £6.08;
• the 18-20 rate will increase to £4.98;
• the 16-17 rate for workers above school leaving age but under 18 will increase to £3.68; and 
• the apprentice rate will increase to £2.60.
   

9. Penalties for late or non-filing of monthly Construction Industry Scheme (CIS) returns by contractors are changing from November this year.
10. The new penalty regime comes out of the Finance Act 2009. The first return affected by the changes will be for the month ending on 5 November 2011.
11. From November 2011, the following penalties will apply to CIS returns that are not filed, or are filed late:

• as soon as the return is late – a fixed penalty of £100;
• two months after the filing date – a second, fixed penalty of £200;
• six months after the filing date – a tax-geared penalty which is the greater of £300 or 5 per cent of the amount of deductions shown on the return;
• 12 months after the filing date – a second tax-geared penalty which is the greater of £300 or 5 per cent of the amount of deductions shown on the return.
   

12. Further information on the new CIS penalties will be published at News for Construction Industry Scheme (CIS) as it becomes available.