BUILDING contractors in York and North Yorkshire are being warned of big fines if they contravene new measures to tighten up the collection of income tax from workers in the construction industry.
The region's chartered accountants are urging contractors to prepare now for a revised industry scheme carrying penalties of up to £3,000 for employers who break the rules.
Under the scheme, which comes into force next April, firms will have to satisfy themselves if their sub-contractors are genuinely self- employed and entitled to receive pay without tax being deducted.
Keith Ward, president of York Society of Chartered Accountants, said the changes meant HM Revenue & Customs (HMRC) was shifting all responsibility for deciding the tax status of sub-contractors on to employers.
He said: "They need to look at the position with regard to all their sub-contractors and make a critical assessment as to whether they are self- employed or are really employees and should have tax deducted from their wages. Some firms employ dozens of sub-contractors every week and for many, particularly smaller ones, it's a minefield which will mean a great deal of extra work to make sure they don't make any mistakes."
But the phasing out of certificates currently issued to self employed sub-contractors means there will no longer be a quick and reliable way for employers to gauge the tax status of the people they hire.
Mr Ward said: "This begs the question of how contractors are meant to satisfy themselves about the status of their sub contractors. This is likely to be the most contentious area of the new scheme with far-reaching consequences for those who get it wrong. With this in mind, contractors should in the first instance definitely seek out advice from their chartered accountants."
Employers will have to make monthly returns to HMRC and errors could result in a maximum penalty of £3,000. If returns are not filed on time, there is a further penalty of £300 with an additional £60 for each day the return is delayed.
Updated: 10:49 Tuesday, August 23, 2005
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