False self-employment costs £2.5bn a year

False self-employment in the construction industry is costing the Treasury £2.5bn a year, according to construction union Ucatt.

The union says that if the Treasury was to clamp down on the practice in this week’s budget, the combined savings could pay for the 2012 Olympics. It estimates that over 800,000 builders are claiming self-employment revenue benefits whilst performing regular work for contractors.

Self-employed builders register for a CIS4 card, which entitles them to pay a lower level of tax and National Insurance contributions. They then work directly for contractors, who tolerate the abuse of the CIS4 scheme because they don’t have to pay for training, holidays, sick pay or other benefits to self-employed builders.

False self-employment is defined as declaring oneself self-employed whilst having to obey orders, having stated hours of work, carrying out regular work which cannot be refused, and being provided with equipment.

Many workers from migrant countries are given temporary CIS4 cards on arrival in Britain, which Ucatt says has contributed to an increase in the practice.

Ucatt general secretary Alan Ritchie said: “Bogus self-employment is the scourge of the industry. It has lead to massive skills shortages and continues to deny workers basic employment rights. Gordon Brown needs to close this tax loophole.”