The Inland Revenue has dismissed as unworkable a series of changes to its controversial construction tax scheme put forward by a government-industry working group.
The joint working group was set up by chancellor Gordon Brown after the budget to examine possible changes to the scheme. It includes representatives from the industry, top clients, the DETR and the Treasury,
It is understood that one of the clients, retailer Boots The Chemists, has resigned from the group in what a government insider described as “disgust” at the Revenue’s attitude.
The source said: “As a major client, [Boots] feels its time is better spent talking to people that listen. It is disappointed at the attitude of the Revenue on this issue.”
Another insider said: “Clearly, the industry is flogging a dead horse with the Revenue. The industry has played along in the hope that the Revenue would realise the scheme is not working but its views are falling on deaf ears. The Revenue doesn’t care about the views of the industry – it’s time construction got the message.”
We haven’t reached agreement with all the people in the group
The new regime was introduced to clamp down on tax avoidance in the industry, but attracted widespread criticism for the burden of paperwork imposed on clients and contractors.
One of the recommendations was a rethink on the CIS24 vouchers – which must be filled in by main contractors and clients when paying subcontractors – but this was dismissed by the Revenue.
The insider added: “Basically, the Revenue believe if they make amendments to the scheme along the lines of those outlined by the working group it will lead to greater instances of fraud in construction.”
It is understood that the representative from Boots voiced objections to the amount of money and time it had to spend processing CIS24s on behalf of contractors when construction is only a small part of its overall business.
However, the Revenue may make one concession. It is understood that it may launch a pilot scheme of 1000 companies to trial the proposal that the CIS6 tax card system be revamped so small and medium-sized firms would not have to produce the card at every site. Instead, the Revenue may issue a certifying document to employers and contractors on behalf of the firm, stating that the firm should be paid gross.
Revenue doesn’t care about the industry – it’s time construction got the message
A spokesperson for the DETR declined to comment and said the DETR’s role in the group was a matter for the Inland Revenue.
Boots was not available for comment.
The Construction Confederation, which has lobbied hard for changes to the scheme, was also not available for comment.
A spokesperson for the Revenue said: “We haven’t reached agreement with all the people on the group, but will be meeting with them on 10 August. There are still matters for the joint working group to resolve.”
She declined to comment on the Boots representatives’ resignation from the group.