700 000 Inland Revenue forms distributed at Christmas, but only 200 000 returned up until now.
Time is running out for firms to meet Inland Revenue deadlines to apply for self-employed tax registration certificates, which replace the current system on 1 August.

Firms must ensure that the forms arrive at their tax office by 1 June as the Inland Revenue says it takes up to two months to complete the procedure and supply eligible firms with the certificate.

The Construction Industry Scheme certificate will replace the 714 certificate that allows the self-employed to pay tax at the end of the year.

David Smith, partner at Milton Keynes-based Accountax Consulting, urged firms to send in their forms early.

"It takes eight weeks now, and if someone is applying in June or July, they will be disappointed," said Smith. He also warned that firms that did not get their certificates in time could find themselves with serious cash flow problems as they struggled with a reduced revenue.

So far, the Inland Revenue has received fewer than 200 000 applications. It distributed 700 000 forms before Christmas. An Inland Revenue spokeswoman described the response as disappointing.

It can take up to two months as we have to check that firms have paid tax over the past three years

Inland Revenue Official

She said: "It can take up to two months [to process applications] because we have got to check to make sure they have paid tax over the past three years." Brian Lucas, commercial services director at contractor Geoffrey Osborne, said the firm was pressing its 1500-strong core of subcontractors to get their tax affairs in order as soon as possible.

"We made our application a few weeks ago and were surprised to hear from the staff in our tax office that we were one of the first firms to send in their form," said Lucas.

Under the new scheme, only individuals with a turnover of more than £30 000 a year for the past three years, or limited companies with a turnover of £200 000 a year for three years, will be eligible for the registration certificate.

Firms that are not eligible will receive a registration card that confirms their self-employed status but means they will be taxed at 23%, much like the existing SC60 card. They can then apply for a tax rebate at the end of the year.

Subcontractors will not be paid if they do not carry a card. Contractors found employing self-employed firms or labour without a registration card or certificate will be liable to a £3000 fine.