CIS shake-up baffles contractors

The warning comes from tax advisor KPMG, whose recent survey indicated that seven out of ten construction industry professionals have concerns about the new Construction Industry Scheme (CIS), which comes into force on 6 April.

Alan Nolan, director of KPMG’s employment tax in construction group, said: “Despite postponing the scheme’s introduction for a year, HM Revenue & Customs (HMRC) has been slow to issue key documents about how it will operate and some construction firms have been too slow to take action. The industry needs to wake up as these changes are just around the corner and if their systems are not set up to manage them, they will run into major problems.”

The new CIS scheme will remove some of the administrative burden of the current one and provide alternatives to the paper-based processes of CIS. The main changes are:

• There will no longer be any need for CIS cards, certificates or vouchers.

• Contractors must verify new subcontractors with HMRC.

• Subcontractors will still be paid either net or gross, depending on their own circumstances, but it will be HMRC who tells the contractor which treatment to use during verification.

• There will also be a higher rate tax deduction if a subcontractor cannot be matched on the system. This rate will apply until the subcontractor contacts HMRC and registers or sorts out any matching problem.

• There will no longer be CIS annual returns.

• Contractors must make a return every month to HMRC, showing payments made to all subcontractors. This will be sent to them in good time, and pre-populated from existing records. Contractors must declare on their return that none of the workers listed on the return are employees. This is called a Status Declaration.

• Nil returns must be made when there are no payments in any month. These can be made over the telephone as well as via the internet or on paper, but they must be made. There will be financial penalties for failure to submit a return.

• The vast majority of subcontractors registered under the existing CIS rules will be transferred over to the new system and will not have to re-register.

• New subcontractors, and those that formerly held only temporary registration cards that expired before new CIS starts, will be required to register with HMRC.

For more information, visit http://www.hmrc.gov.uk/new-cis/