This scheme will mean that registration and verification can be done online thereby cutting bureaucracy. Once registered, subcontractors will no longer have to physically present tax cards to contractors.
The Inland Revenue concedes that there may be an extra burden for contractors, though, as they will now have to contact the Inland Revenue via the website to verify the status of the subcontractor. The Inland Revenue says that contractors will face stiff penalties if they make false declarations regarding subcontractors' employment status. The website will then inform the contractor whether the subcontractor has registered and whether they should be paid a gross or tax-deducted amount.
The new verification process replaces the Registration (CIS4) and Gross Payment Certificates (CIS6 and CIS5) currently held by subcontractors. The Inland Revenue says the removal of these cards will cut fraudulent claims made by subcontractors.
The government also plans to abolish vouchers to cut down on paperwork. Instead, contractors will have to submit returns on a regular basis detailing who has been paid, how much has been paid and any materials provided by the subcontractors.
The Inland Revenue will send a statement to subcontractors so they can check the amounts against their payment slips to ensure they are correct. To reduce administration, the Inland Revenue is planning to allow returns to be submitted electronically.
The Major Contractors Group and the Construction Confederation have broadly welcomed the proposed changes, but there are worries about the costs involved in the introduction of the new system and question marks over how the scheme would be monitored.
The consultative document requires a response by 28 February 2003, and will be implemented by 2005.