Laing group taxation manager and chairman of the industry’s joint taxation committee Les Angell said many major contractors, including his own, had gone for this option.
The opt-out was negotiated by the Construction Confederation after it became clear last month that most subcontractors had not received the documentation required for scheme (9 July).
Without the opt-out, which allows main contractors to continue to use the previous system, majors would not have been able to pay subcontractors. They now have until 5 November to implement the CIS.
Joking, Angell said: “While it would have been a wonderful excuse not to pay subcontractors, most would have walked off site within five minutes of us attempting to switch to the scheme. That would have done nobody any good. I think all the majors will now progressively move over to the new system between now and 5 November.”
Patrick Murray, group tax manager at Mowlem, said it too had gone for the opt-out, although it is also paying subcontractors that have received their CIS certificates.
But although major contractors reported relatively few problems this week, difficulties were arising further down the payment chain.
Crunch time will be in a few weeks if people have still not applied for temporary cards
One London-based subcontractor said he was unsure whether his company accountant had applied for the opt-out, but insisted that he would continue to pay labour-only subcontractors regardless. He said: “If we don’t all hell will break loose. You cannot refuse to pay people when they’ve worked. Crunch time will be in a few weeks if labour-only subcontractors still have not applied for the temporary cards.”
Under transitional arrangements, subcontractors must go to their local tax office with documents proving that they have applied for their new certificates before they are entitled to a temporary card allowing them to be paid.
Another subcontractor said the delay would give his accountant time to work out ways of ensuring that labour-only subcontractors continued to pay tax gross. He said: “Most of my men haven’t applied for cards, but when they do, we will try to use a scheme the accountant has invented to cut their tax bill.
“We might pay them half their money as wages and just say the rest is for materials costs. If we didn’t we wouldn’t get anyone to work for us.
“I haven’t a clue if we have a dispensation, that is what I pay my accountant to sort out. But if I didn’t pay them on Thursday, I might not have an office on Friday.”