The number of construction workers using the CIS tax system rose by 39,000 last year despite Government moves to crack down on self employment in the industry.

The figures were obtained by construction union UCATT.

HM Revenue and Customs confirmed that 963,000 workers received payments via CIS in 2014/15 and “this figure will increase later this year as a result of some returns being made late.”

That is a 39,000 increase on the 924,000 workers paid via CIS during 2013/14.

UCATT said: “In April 2014 the Government introduced new rules that prevented agencies and other “intermediaries” from employing workers on a self-employed basis.

“The changes in the rules, which have resulted in hundreds of thousands of workers being forced to operate via umbrella companies, were expected to result in a fall in the number of workers employed via CIS.”

Brian Rye, National Secretary of UCATT, said: “These figures show the fragmented mess that the construction industry is in.

“The Government’s changes which were meant to reduce false self-employment clearly haven’t worked while at the same time hundreds of thousands of workers are being employed by agencies via umbrella companies.

“It is clear that the only way to resolve the problem is for fundamental change with workers either being classed as employees or being genuinely self-employed in business for themselves.

“Further tinkering of the rules will just make the situation worse.”

Howard Royse, construction industry representative for the Institute of Chartered Accountants in England and Wales and author of the book Construction Industry Scheme – Guidance and Commentary said: “The increase in the number of subcontractors being paid through CIS in 2014/15 does not indicate how long those people were engaged as self-employed – it may have only been for a few days.

“Many of those workers will have been paid through both CIS and umbrella schemes in the course of the year.

“The recent increase in activity levels in construction is bound to lead to more workers being engaged, through direct employment and self-employment. That does not in itself make those self-employment engagements bogus.

“The change in rules for intermediaries resulted in more agencies putting workers through umbrella schemes, for fear of how HMRC may enforce the rules regarding supervision, direction and control.

“No doubt some genuinely self-employed workers were affected by this reaction.

“This may well have produced a short-term reduction in money paid in tax – but the new rules for travel and subsistence expenses should address the matter of dodgy operators offering high take-home pay schemes.”