The Inland Revenue wants contractors to transfer subcontractor pay records electronically. But what sort of software is needed and how much does it cost?
Contractors are dreading 1 August. On that day, a new tax system for subcontractors comes into force. Under the new rules, contractors will have to send the tax man a monthly payment voucher for each subcontractor they employ, stating the value of work they have carried out. The vouchers correspond to the new tax registration card CIS4 and certificates CIS5 and CIS6 which replace the existing 714 and SC60. As if that were not complicated enough, the Inland Revenue is encouraging contractors to use electronic data interchange to transfer the information, rather than do it on paper.

John Holden, EDI consultant at specialist software firm Kewill Electronic Commerce, explains how EDI works: “It’s like a highly secure e-mail system. Company A sends a complex e-mail to the Inland Revenue, which uses it to update its records.” EDI can run on a PC with a simple modem, and does not need a dedicated machine.

The Revenue says EDI will speed up the system because payment vouchers can be sent in quickly and returned immediately if there is a problem, such as incomplete information. Many large construction firms already use EDI to send PAYE information to the Revenue. These firms will be able to add the facility to send vouchers by EDI to their existing system.

Computer software company Mentor Systems offers a wide variety of EDI solutions for payroll and accounts and its client list includes several major contractors. The firm has used the Revenue’s specifications to develop software geared to the new Construction Industry Scheme tax vouchers that can be added to its existing systems.

Plymouth-based SAA is another specialist providing EDI software. Like Mentor, it supplies large construction firms with integrated accounting packages, and these will automatically include a facility for sending vouchers to the Inland Revenue.

One housebuilder, Westbury Homes, is even looking at developing its own software to cope with the tax changes.

So how much does EDI cost? SAA and Mentor were reluctant to comment on the cost of sending tax vouchers electronically because, for their contractor clients, this is only one part of a tailored business package.

Kewill’s Holden was more forthcoming. The firm’s stand-alone EDI system costs £2000 for the total package in the first year. This includes installation of the system and software, plus instructions on how to use it. Firms also need a value-added network to communicate with the Inland Revenue.

The initial outlay with Holden also includes rental to the network provider, plus user-support charges. After the first year, these two elements are charged at £400 a year.

The big question is whether the benefits justify the outlay. “It depends on your perception of the hassle factor of producing written documents,” says Holden. “Using EDI reduces the administration and gets it out of the building quicker. My final comment when talking to people is: ‘That’s how much it costs – how much is it worth to you?’” So, how much is it worth to contractors and clients? Brian Lucas is commercial services director at contractor Geoffrey Osborne. He is considering adopting EDI to ensure that vouchers get to the Inland Revenue on time, and describes the costs quoted as “bearable”. He adds: “We would probably adopt it because it seems more economical than taking on additional staff.” But not all the new paperwork can be dealt with by EDI, including the voucher for CIS6. This is issued by the subcontractor and must be completed by the contractor.

For many in the industry, a new tax procedure is daunting enough without the added complication of electronic data interchange. As Richard Clancy, financial controller at Jarvis, says: “Once the system is up and running, it will make things easier, but there is going to be a learning curve because we have never done it before.” For more information, contact: John Holden, Kewill 0161-969 8763; Alan Bricknell, SAA, 01752-606000; Janet Rowles, Mentor Systems, 01254-295000.

On the wire

Sealants site Dow Corning, the silicone and organic sealants outfit, has launched two web sites. The corporate site provides information on the company, its products and services. The firm has also launched the Discovery Centre, providing information on job opportunities in the firm, extracts from industry presentations and opportunities to enter into discussions with senior management about business issues. and Heating on the web Heating systems firm Ambi-Rad will place all its standard technical specifications on the web this summer. The move is designed to enable consultants and specifiers to calculate heating specifications from their computer screens, using information taken directly from the firm’s interactive web site. On-line directory The Heating and Ventilating Contractors Association is to publish a directory of members on the web. HVCA Members-on-Line is an Internet-based directory serving all the building services sector. Plastics in cyberspace Hunter Plastics has launched a web site offering specifiers and installers access to product information. Digital camera CD-ROM The Digital Camera Company has unveiled a CD-Rom that allows architects and engineers to test sample images taken by 83 leading models of digital camera before deciding which to buy. Digital Camera Sampler has 250 digital images from cameras ranging from Agfa to Yashica. Interactive bricks Hanson Brick has set up an interactive web site offering product information. A section on technical services is supported by a team of experts who can advise on masonry related issues. Gas fires on the net Valor Heating has launched a web site of the various gas fires on the market. Having chosen a model, users can browse the on-line directory for stockists and installers.

Should you buy EDI?

  • EDI will simplify and speed up sending large quantities of vouchers
  • It will cut down on paperwork and allow problems such as incomplete data to be rectified quickly
  • A new system can be subject to hiccups in infancy
  • Not all the new tax vouchers can be dealt with by EDI, such as CIS6
  • Only affordable for large contractors