Construction Industry Scheme

Oral Answers to Questions — Treasury – in the House of Commons at 12:00 am on 15th April 1999.

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Photo of Mr Brian Cotter Mr Brian Cotter Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson 12:00 am, 15th April 1999

If he will make a statement on the likely impact of the introduction of the construction industry scheme. [79456]

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

The new construction industry scheme, which commences on 1 August this year, will significantly reduce the opportunity for tax evasion in the building trade. This will be achieved by restricting gross payment certificates to subcontractors who have met their tax obligations on time and have a turnover above the threshold we have set in regulations; and by requiring other subcontractors to register with the Inland Revenue.

Photo of Mr Brian Cotter Mr Brian Cotter Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

I thank the Minister for that answer. May I point out that the scheme will exclude 200,000 subcontractors from receiving gross payments? We are told that this is to combat £50 million of tax evasion. However, the figure calculated of tax liability for 714 tax certificate holders is just £1,800 per head. That means that £50 million of tax evasion is being drawn from only 27,000 certificate holders. Is it reasonable that 170,000 honest contractors should suffer being sidelined by contractors and subjected to cash flow problems in order to reach this small minority? May I suggest that there could be a fairer, more efficient way of avoiding this tax evasion than the scheme proposed?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I know that the hon. Gentleman has received many representations in his constituency and he has written to me a number of times on this matter, but I should point out some facts to him. The legislation to deal with this abuse in the construction industry, which has the support of the industry, the trade unions and associations, was first introduced to Parliament in 1995 with all-party support. It was further dealt with in legislation in 1996, again with all-party support. The issue is the evasion of tax in this area and was recognised by the industry, the trade unions, the Government and employment tribunals as a result of some hearings. The Government must take action. Instead of worrying about, and undermining, such action, the hon. Gentleman should be supporting the Government in dealing with a very difficult area. He should not break the all-party support that his party has helped to maintain until now.

Photo of Mr Ian Bruce Mr Ian Bruce Conservative, South Dorset

Will the proposed schemes announced in the Budget for other contractors follow the path of the construction industry scheme? The suggestion that such a scheme will be introduced for information technology contractors, for example, is causing a great deal of worry among all sorts of self-employed people and those who form single-member limited companies. Exactly what is the Treasury up to?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

The hon. Gentleman is confusing a number of items. The clauses in the construction industry scheme which his party initiated, with our support, and which will continue, are designed specifically to deal with the problem of labour-only subcontractors—who used to be called the lump—in the building industry. The turnover threshold that we have introduced is set at a very fair level—lower, I might say, than the one his Government were going to set.