Is Your Construction Firm Under HMRC Investigation?

Why Construction Firms Are Targeted by HMRC for Tax Investigations

The construction industry has become a significant focus for HMRC due to its complex nature. HMRC aims to ensure compliance, particularly with reporting income and VAT obligations, and frequently investigates companies to close the tax gap in this sector.

HMRC Targeting Construction Firms: A Regular Feature on the “Name and Shame” List

Construction firms are frequently singled out by HMRC, and many find themselves featured on the government’s “name and shame” list for failing to meet their tax obligations. This public list highlights businesses and individuals who have deliberately evaded tax, with construction companies being one of the most common offenders due to the industry's complex nature and use of subcontractors.

Appearing on the list can severely damage a firm's reputation, leading to lost contracts, damaged relationships with clients, and difficulties in securing future business. The construction sector's reliance on trust and partnerships means that public tax failings can have long-lasting negative impacts.

HMRC’s focus on the industry stems from the high risk of tax avoidance due to cash transactions, underreporting, and non-compliance with the Construction Industry Scheme (CIS). Firms failing to correctly handle VAT, payroll taxes, or CIS deductions are particularly vulnerable to scrutiny, making the name and shame list a real threat for non-compliant companies.

Common Types of HMRC Tax Investigations in Construction

Construction firms are subject to a variety of HMRC tax investigations, each focusing on different areas of compliance. One of the most common is a general tax investigation, where HMRC scrutinizes a firm’s overall tax position, including corporation tax, VAT, and income tax filings. These investigations are often triggered by discrepancies in the firm’s tax returns, such as underreporting of income, suspicious expense claims, or inconsistencies in VAT declarations. Construction businesses, especially those dealing with large-scale projects and subcontractors, can easily fall into HMRC’s spotlight due to the complexity of their operations.

Compliance checks are another method HMRC uses to ensure construction firms are adhering to tax laws. These are less intrusive than full investigations but can escalate if issues are discovered. HMRC may ask for records to ensure the firm is correctly handling VAT, paying employees, and filing returns on time. Failing a compliance check could lead to more severe penalties, including fines and interest on unpaid taxes. For construction businesses, maintaining accurate records and being prepared for these checks is essential, as errors or omissions can quickly snowball into larger investigations.

One area where construction firms are heavily scrutinized is the Construction Industry Scheme (CIS). Under CIS, contractors must deduct tax from payments to subcontractors and pass these deductions on to HMRC. Errors in these deductions, whether due to misclassification of workers or incorrect tax filings, are a common trigger for HMRC investigations. Contractors who fail to comply with CIS rules may face substantial penalties, and subcontractors incorrectly treated as employees may also face tax discrepancies. Given the importance of CIS in the construction sector, it’s crucial for firms to stay up to date with their obligations under this scheme to avoid investigations.

Why Choose Us for Your HMRC Tax Investigation

If you choose to seek specialist advice from Tax Dispute Experts, you will benefit from our:

Construction Industry Expertise: We specialise in tax issues specific to construction firms, including CIS compliance and VAT, ensuring you get industry-specific advice.
Comprehensive Support: From initial inquiries to negotiations with HMRC, we handle every step of the investigation, managing the process so you can focus on your business.
Minimise Risk and Penalties: We proactively identify risks, assist with voluntary disclosures, and negotiate with HMRC to reduce fines and penalties.
Tailored Solutions: We customise our strategies to fit your firm’s unique structure and needs, whether you’re a contractor or subcontractor.
Proven Success: With a track record of resolving tax disputes for construction businesses, we are trusted experts in getting the best outcomes.

Get Expert Help Today

If your construction firm is under HMRC investigation or you suspect an issue with your tax compliance, don’t hesitate to contact us. Our experience in handling tax disputes for construction businesses means we can guide you to a resolution with minimal disruption to your operations.