The Inland Revenue is to press ahead with the rollout of its internet-based CIS tax scheme next April, despite warnings from industry representatives that some firms will be unable to operate it, writes Sarah Richardson.
The Joint Taxation Committee of the Construction Industry had appealed to the government to delay the introduction of the scheme until firms have had a chance to test its processes and software.
The decision to go ahead with the scheme in the next financial year has led to fears of meltdown in the industry’s payment mechanisms and rising costs for contractors.
Liz Bridge, director of tax at the Construction Confederation, who sat on the taxation committee, said: “The industry is appalled and angered by this decision. Despite repeated warnings that there has not been enough preparation time, the revenue and the government have decided to carry on regardless.”
The JTC claims that the software and paperwork necessary to run the scheme will not be in place by the start of the scheme, which will leave firms unable to cope with the online system. Many large software providers have not designed software for it, let alone begun selling it.
Firms will be permitted to complete the documentation manually but this is not practical for larger companies. There are also fears that firms that trade under multiple names will not be easily accommodated.
Despite the problems, firms that do not return documents correctly and on time will face financial penalties.
The Inland Revenue’s failure to delay the start of the scheme will create commercial chaos for our industry
Liz Bridge, director of tax at the Construction Confederation
The JTC claims that any time won by delaying the start of the CIS scheme would have allowed employers to try out two systems that will now remain largely untested. One is an interactive tool available on the Inland Revenue’s website, which will test whether a worker is employed or self-employed. The other is an online facility for verifying workers’ identities.
Bridge said: “The Inland Revenue’s failure to delay the start of the scheme will create commercial chaos for our industry, as well as significantly increasing the costs of the change for contractors as they try to wade through that chaos. The industry has tried to be willing, helpful and positive partners in the discussions and has been left feeling bemused and betrayed.”
Morris Fowler, head of Sussex contractor Fowler Brothers and a member of the JTC committee, said it would be impossible for the industry to be ready for the start date.
He added that there was a question mark over whether the Inland Revenue’s own software would be able to cope. He said: “I had to fill in my PAYE details online at the end of the year and it was system overload. This will be worse.”
Fowler said the problems were likely to be exacerbated by the Inland Revenue’s compliance regime. He said: “It is very strict on making sure firms return documents correctly and by the correct date. I can see substantial problems.”
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