The firm says the increase for the year ending 31 March 2014, up  from £122m the year before, is the result of  HMRC’s compliance crackdown on construction companies who pay their workers as self-employed  when they should be paid  through PAYE. In contrast, the comparable figures for 2011-12 are £78.9m and for 2010-11, £66.9m.

Graham Jenner, director at NoPalaver, said: ‘HMRC has been suspicious of self-employed construction workers for some time. It is clamping down on companies hiring individuals it feels don’t meet its strict criteria and I would expect them to continue to do so as it seeks to generate more revenue.’

According to NoPalaver, HMRC is forcing construction companies to justify their workers’ self-employed status. This has caused problems for many construction companies, as they frequently lack the paperwork to prove that their workers are genuinely self-employed.

Jenner pointed out that self-employed subcontractors move between jobs regularly and said that erratic working patterns like this create lots of opportunity for mistakes with paperwork and tax status. Not having the correct paperwork can see employers given a penalty worth the equivalent of six years’ worth of PAYE taxes and national insurance payments, plus interest and up to 100% of the tax in penalties.

NoPalaver says that as well as targeting construction businesses directly, HMRC is now also turning its focus to the employment intermediaries who are now required to deduct tax as if the worker is employed regardless of whether they would otherwise be genuinely self-employed.

In an update published last month, HMRC confirmed that from 6 April 2015, employment intermediaries will have to start providing quarterly reports explaining why workers on their pay roll are not using PAYE.

Jenner said: ‘These changes to the rulebook make it even more important for construction companies, employment agencies and contractors to ensure their tax arrangements are in order and fully compliant with new legislation.’