Chancellor’s tax tinkering could increase costs for construction firms

The chancellor’s plan, announced in the Autumn Statement, to review the valuation of ‘benefits in kind’ could threaten the viability of the nation’s largest infrastructure projects as the UK’s mobile construction workforce could be subject to massive tax hikes, says leading design and consultancy firm Arcadis. 

Changes to what constitutes a taxable benefit could mean that construction workers on major transport and energy projects could be subject to significant increases in tax if accommodation and food was treated as a taxable benefit. Such a change could mean that construction firms tasked with creating vital rail infrastructure and power plants could need to radically adjust their business models or risk seeing projects delayed and costs rise. 

Current arrangements allow costs of subsistence and temporary accommodation to be treated, within reasonable limits, as a non-taxable benefit. Under the review, the range of taxable benefit could expand, increasing costs into an industry that is already challenged to deliver better value. In its efforts to widen the tax base, the Treasury could inadvertently damage an industry that is pivotal to boosting the UK’s productivity. 

Amidst all of the fanfare in connection with the £23bn infrastructure fund and industrial strategy, the Treasury’s proposed consultation is one that the industry would be well advised to take very seriously if it is to retain and expand its capability to deliver to the UK’s infrastructure need.   

Simon Rawlinson, Arcadis head of strategic research, commented: “It may have gone largely unnoticed but the chancellor’s consultation on something as minor as benefits in kind could potentially derail the nation’s major infrastructure projects. This won’t be intentional, but we know that given the complexity of the UK’s tax system, small changes can have disproportionate impacts. 

“Construction has relied on a mobile workforce since the days of the navvies and continuing investment in critical infrastructure such as Sellafield relies on being able to take skilled resources to remote locations.  With infrastructure investment shifting from Central London to Hinkley Point and HS2, the importance of labour mobility can only grow. This is a consultation that has to be taken very seriously indeed.