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Labour’s Shadow Chief Secretary to the Treasury, Rachel Reeves, has announced plans to stop construction firms attempting to reduce their tax bills by falsely listing workers as self-employed

Ms Reeves said in an announcement: “We cannot afford to leave loopholes in the tax system that allow vital revenue to be lost. It is also unfair on the majority who do the right thing play and by the rules if some are able to avoid paying their fair share of tax.

“The prevalence of false self-employment in the construction industry has long been recognised as a problem by employers and experts in the sector. It arises because the Construction Industry Scheme – itself established to tackle the historic problem of “off the books” lump labour being used to avoid tax – creates a way for employers to pay lower levels of National Insurance by classing their workers as “self-employed” even though most people would regard their relationship as one of employment.”

In 2009 the Treasury estimated that around 300,000 workers in the construction sector were in this position, at an annual loss to the taxpayer of £350m – or more than £380m in today’s prices.

A year ago Labour set up an investigation and the last Labour government proposed criteria whereby workers would be automatically “deemed” to be treated as employed for tax purposes if they met criteria that most people would regard as obvious signs that they were employees, rather than self-employed subcontractors. This, says Ms Reeves,  would be a Labour government’s starting point.

Ms Reeves said: “We will of course consult further and work closely with the construction industry to design the criteria so that the right level of flexibility is maintained, that those who are genuinely self-employed are not hit, and that measures do not impact negatively on a sector that has been hit hard by the slump in infrastructure and housing investment we have seen under this government.”