Major reforms are to be made to the Construction Industry Scheme from April 2006. The legislation to give effect to the changes was enacted in the Finance Act 2004 and detailed regulations are now in their third draft.

We asked HMRC when guidance will be made available to employers, contractors, subcontractors and system developers. There are some draft fact sheets circulating that have been prepared by HMRC but, as the final regulations have not been laid, the fact sheets have not been made available generally on the HRMC website.

HRMC have advised us that the 9 fact sheets, including a detailed fact sheet on employment status, are expected to be available on the Internet from August for anyone to download and hard copies will be sent out to contractors and subcontractors at the beginning of 2006. Some of the information included in the fact sheets also forms part of the draft technical pack available to software designers.

We have been able to obtain copies of the draft fact sheets and hope to be able to provide a summary of how the scheme will operate in a coming newsletter.

In the meantime, here are some of the key features of the new scheme:

• registration cards, tax certificates and payment vouchers will no longer be used
  
  
• contractors must verify subcontractors with HMRC in order to determine whether payments can be made gross or with deduction of tax
  
  
• the tax deduction rate for verified subcontractors will continue at 18%, but a rate of 30% will be used for tax deductions for those who are not registered or who cannot be verified
  
  
• the CIS300 monthly return will include a declaration by the contractor that "the employment status of each individual detailed on this return, and any continuation sheets, has been considered and that the contract under which returned payments are made are not contracts of employment"
  
  
• the penalty for not submitting a monthly return on time will be an automatic penalty of £;100 for a return of up to 50 subcontractors increasing by a further £;100 for each additional 50 subcontractors that should have been included on the return
  
  
• there will be no annual returns.

Discuss this news item in the PayPerShop Forum

...back to 26 May 2005

Sources:
Reform of Construction Industry Scheme (CIS Reform) Online: Internet Service Technical Pack for Software Developers