A firm of Birmingham accountants says it has uncovered a loophole in a government business support scheme that could end up costing stressed construction firms extra cash.
The Birmingham office of chartered accountants HW claims that Alistair Darling’s much-vaunted tax payment holiday scheme will not apply to a number of building firms – one of the hardest-hit sectors in the financial downturn.
The tax payment holiday was introduced by the chancellor in last year’s pre-budget report to give businesses a chance to recover after a tough winter period.
But HW say they have found it does not apply to the vast majority of smaller firms.
HW senior partner Henry Briggs said: “The Chancellor was quick to promote the announcement in his autumn statement that cash flow relief would be available to ease the taxman’s demands. Many businesses are now applying to HMRC to delay tax payments albeit having to pay interest on the outstanding amount.
“What he has kept quiet about is the Revenue’s approach to those firms registered with the HMRC Construction Industry Scheme. If they make payments late under this scheme, as would be the case if they request late-payment facilities, or delay in making PAYE payments on their staff, they run the risk of losing their CIS status. This will cost them dearly.
“Loss of registration would mean a compulsory deduction of 20 per cent tax on all such payments.
“We now know that HMRC are sending out notices to late payers of PAYE that their status is about to be removed – based on inaccurate information about past payments being late.”
The loophole has been criticised by the West Midlands branch of the Taxpayers’ Alliance. Campaign agent Fiona McEvoy said: “It is genuinely unfair that construction companies, which are being hit harder than most in the current crisis, are being excluded from the tax holiday. It would be a disgrace if these technicalities end up costing jobs.”