I would be interested to have comments from readers who have dealings with this problem with some of their construction industry clients.
Maybe you are approached by a prospective new contractor/subcontractor. You know what it's like. They bring you their books and they're a few years in arrears. They have become accustomed to paying all their subcontractors gross with impunity. You mention the prospective £100k HMRC penalties for failure to deduct tax and all you get is "Oh, I don't do all that stuff" (i.e. get involved in all that red tape).
Or, "I'm too small for the taxman to worry about",
Or, "I only paid them a few hundred quid for installing a gas fire",
Or, "If I had to do all that, I'd have to give up",
Or, "Well, everyone else I know is doing it" (implying that you are some sort of "weird" accountant who doesn't act in the client's best interests),
Or, "How come me best mate's getting away with it",
Or, "Don't you worry, I'll deal with the taxman when he comes knocking" (I.e. "with me Irish blarney I could talk the hind legs off a donkey" [taxman is not a donkey, contrary to popular belief]).
I can tell that some of these clients just really do not want to get involved. All they want to do is build, get paid and supp ale.
So, have any of your client's found legitimate ways around the subcontractor scheme, like the customer splitting the bill between all of the subcontractors (needs customer cooperation and many would refuse to play ball - "who do I sue if it goes wrong?".
My slight concern is the client moving on to a new accountant who "does a good job for all me mates". Well, what is he actually doing that I don't know about.
I can tell from the faces of one or two of my landscape gardners that they think I'm an idiot when I mention their building activities and the need to deduct tax and be registered as a contractor in the construction industry tax scheme.
One client keeps on threatening to pack it all in because he is too ill to do heavy work, but he has a great business and needs workers but refuses to commit to employ or be registered as a contractor. He just wants to pay them gross and then forget about it. I have warned him but he just won't be told. I think he is about to jump ship to a "more accommodating" accountant.
The great problem is that when you disclose pay costs on the client's tax return you are effectively telling HMRC that you are paying tons of wages and other staff costs without deducting PAYE. And by putting subbies costs in with cost of goods bought etc. you are just masking what is really going on with all the problems that could bring.
Or, do I just attract the wrong sort of builder?