(Except clauses 4, 19, 23, 26 to 29, 87 to 92, 131 and 134 and schedules 1, 5 and 38) - Clause 40 - Treatment of deductions from payments to sub-contractors

Part of Finance Bill – in a Public Bill Committee at 10:30 am on 21st May 2002.

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Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs 10:30 am, 21st May 2002

We and the industry broadly welcome this clause, which provides a cash flow advantage and in part resolves some long-standing problems, but I want to raise two issues, one of which appears as a starred amendment.

First, in parallel territory in the context of IR35, a similar problem was dealt with by ESCC32 for the tax year 2000–01 and its application to subsequent years was to be reviewed. I should be grateful if the Government would confirm that the measure will apply to 2001–02.

Secondly, clause 40 does not provide for tax deducted from payments under the construction industry scheme to reduce PAYE liability to account for tax on payments under that scheme made by an unincorporated taxpayer. Would it not be appropriate to put incorporated and unincorporated organisations on the same basis under the regime?

Although the provision is welcome, the construction industry scheme remains a problem because the Inland Revenue does not always enforce or police it effectively. There are minor improvements in the Bill, but there is a long way to go. Non-compliance and slack administration have the effect that some businesses may be hit hard while others are not noted. Are the Government considering resources to enable the scheme to be more efficient and policed more effectively? If not, is it worth continuing with it?