CIS FACTS

CONSTRUCTION INDUSTRY SCHEME (NEW CIS)

On 19 October, the Financial Secretary announced in a written answer to a Parliamentary Question that the Government would allow the construction industry a further twelve months, until April 2007, to prepare for the introduction of new CIS. This announcement means that the current scheme will continue until 5 April 2007.

From 6 April 2007 the current scheme is due to be replaced by new CIS. The new Scheme will remove some of the administrative burden of the current scheme and provide alternatives to the paper based processes of CIS. The main changes are:

o There will no longer be any need for CIS cards, certificates or vouchers.

o Contractors must check or 'verify' new subcontractors with H M Revenue & Customs.

o Subcontractors will still be paid either net or gross, depending on their own circumstances, but it will be H M Revenue and Customs who tell the contractor which treatment to use during verification, not a piece of plastic.

o There will also be a higher rate tax deduction if a subcontractor cannot be 'matched' on our system. This rate will apply until the subcontractor contacts HMRC and registers or sorts out any matching problem.

o There will no longer be CIS annual returns.

o Contractors must make a return every month to HMRC, showing payments made to all subcontractors. This will be sent to them in good time, and pre-populated from existing records. Contractors must declare on their return that none of the workers listed on the return are employees. This is called a Status declaration.

o Nil returns must be made when there are no payments in any month. These can be made over the telephone as well as via the internet or on paper, but they must be made - there will be financial penalties for failure to submit a return.

o The vast majority of subcontractors registered under the existing CIS rules will be transferred over to the new system and will not have to re-register.

o New subcontractors, and those that formerly held only temporary registration cards that expired before new CIS starts, will be required to register with H M Revenue & Customs.