Construction Industry Scheme postponed until 2007

The introduction of the Construction Industry Scheme (CIS) has been postponed by one year, until April 2007. The scheme was originally meant to be implemented in April 2005, before being put back until April 2006.

The ECA has welcomed

the decision by HM Revenue and Customs (HMRC) to delay the scheme’s launch. The ECA and other organisations were worried that introducing the new electronic tax scheme without allowing sufficient time for the proper development of software would have resulted in chaos for the entire payment chain. This in turn would put undue pressure on contractors, especially small and medium-sized firms.

Criticisms levelled at the Inland Revenue include that commercial software to be used by smaller contractors is still not available. The Revenue’s own computer system would not be ready until next February, just weeks before the planned launch.

The Construction Confederation had predicted that software failures would lead to contractors being deducted an emergency tax rate of 30% from suppliers’ payments, forcing many to go out of business.

David Pollock, ECA director said: “I am pleased that HMRC has listened and responded to our concerns. Had the new CIS started in April 2006, the result could have been total chaos. The problem of late payment would have been particularly acute.

“We now have the time for a proper timetable to be developed and implemented. This will help to ensure that the new CIS will answer the needs of the construction industry and the government.”

All eyes will be now on the run-up to introduction in April 2007. During the period before implementation of the scheme, the Inland Revenue will step up its level of advice and compliance activity with the industry, including new interactive online software and up to 70 telephone advisers.