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AIA

CIS delay delights lobbyists

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20th Oct 2005
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The Association of Chartered Certified Accountants has welcomed HMRC's decision to delay implementation of the controversial Construction Industry Scheme for a year.

However, the ACCA, which has lobbied for the deferrment, is concerned that many building contractors will not be fully compliant with the scheme - even with the 12 month delay.

Bob Cope, ACCA senior public policy advisor, said: "We are pleased that HMRC has listened to industry's views, especially as a recent survey has shown that whilst the majority of contractors were aware of the proposed overhaul, less than 20% had actually planned to implement the changes.

"Given that the new scheme was scheduled to go live in April 2006, there were serious concerns that businesses would have insufficient time to amend their IT systems and manual procedures or to train staff on the operation of the new scheme, particularly since HMRC was still testing its own new systems and procedures."

The ACCA is warning that HMRC will continue to 'get tough' with the employment status of building contractors. Over the past six months it has issued thousands of letters to contractors and sub-contractors working within the construction industry, advising them to check the terms of engagement under which building workers are employed.

Cope added: "We are certain that HMRC will further 'step up' its compliance demands within the scheme over the next year and will further increase its monitoring visits to identify sub-contractors which it believes should be classified as employees."

ACCA is urging contractors to make sure their house is in order. One of the biggest misconceptions in the trade is that holders of CIS 4 cards are automatically self-employed - this is not the case.

"The engagement of each sub-contractor should be made on a contract by contract basis and the status of each engagement must be determined by the activities being undertaken. Failure to comply could result in HMRC enforcing penalties and the reimbursement of PAYE tax and Class 1 NIC for the employment of any sub-contractor which it deems should have been classed as an employee, says the ACCA"

The ACCA is contractors to begin assessing how the 2007 scheme will impact on them.

HMRC has indicated that holders of CIS cards will be able to renew them for a further year. However, when the scheme does go live in 2007, these will be removed and replaced by a verification process requiring the use of the internet or call centres, to confirm that a sub-contractor is registered within the scheme.

Another significant change will be the requirement of a contractor to complete a monthly return. A contractor will be required to certify that he has confirmed the engagement status of all sub-contractors included in the return - failure to submit a correct return could result in a £3,000 penalty. There will also be an automatic penalty of £100 for failing to make a return.

More confusing still is the fact that contractors must still file monthly returns regardless of whether or not any payments have been made to sub-contractors during that month.

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Replies (16)

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By steve tees
27th Oct 2005 11:39

Build-IT
I have been trying not to self-promote, but since John Stokdyk says it's OK (if relevant to the question) I'll "come out" and add that the Build-IT system for construction from EVision is CIS compliant and used by an increasing number of construction business throughout the UK. It provides a comprehensive solution for construction costing, including subcontractors, self-billing, plant hire, etc. etc.

We too, would be able to comply with the new regulations later this year. If anyone wants more information on this fully integrated Microsoft backed solution, please contact me via [email protected] or look on our website (www.evision-crs.co.uk).

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By jimeth
26th Oct 2005 14:36

COINS Clients prepared for new CIS
Christopher Methley asked what software suppliers were being used by companies who had software changes in place for new CIS.

Construction Industry Solutions ("Coins") is making its first release of New CIS compliant software in November 2005. A number of clients have already been invited to joint testing seminars in late November. These are proceeding despite the delay in the scheme start date. A further release will be made available in January 2006.

From the beginning, we made the start date of the new scheme configurable in the software so that the delayed start will not mean any changes (unless HMRC move the goalposts!!). Meanwhile Coins is fully compliant with the existing scheme.

We have been in communication with all our UK clients since April to help them prepare for these changes. We will continue to work with our clients to ensure that they are well prepared when the changes come in. Naturally, the delay means that there is more time for new clients to implement Coins in time for the changes.

Incidentally, roughly 30% of UK construction spend is processed through Coins, including both House Building and Contracting, so we are a major player in this specialised field.

For further information, see http://www.coins-global.com/ or email [email protected]

Jim Etherton ([email protected])
Senior Product Manager
Construction Industry Solutions Ltd

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By steve tees
25th Oct 2005 17:30

Lumping it
Correct me if I'm wrong, but I thought the term "lump" labour came from the method of payment (i.e. lump sums). Is that not the way sub-contractors are paid, CIS deductions or not? If the Construction Industry Scheme did not exist, then we'd probably be straight back to the "lump".
All brickbats welcomed if I'm wrong.

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By AnonymousUser
26th Oct 2005 10:33

dump the lump
Technically you may well be right Steve. The "lump" so to speak was paid to one source who would distribute amongst "Micky Mouse, Donald Duck, "dead men" etc. etc.
Those were the days when anybody could walk on to a site and get a few days work here and there and sign any name they wanted to.
That is no longer the case.
The problem with CIS is, like most of our tax system, it is past its sell by date and no amount of tampering will improve its workings. Don't get me wrong; when it was first intoduced in the early seventies it did a magnificent job.
The Government should start looking at our tax system from the tax payers point of view instead of "how can we get as much as possible out of this form of taxation". That way, by setting up "user friendly" systems the "take" will automatically increase and we can get rid of "compliance".

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By User deleted
25th Oct 2005 12:06

Maybe I'm being cynical...
... but the way in which this announcement has been made by HMRC worries me.

At the time of writing, the announcement has yet to make it to the main “What’s New” section of the HMRC website – the last entries are dated 19th October. There is an announcement on the “What’s New” section relating to “Taxes and Tax Credits formerly dealt with by the Inland Revenue”, but this only appeared after 5.00pm on Friday (I know, I checked just before I went home!). And it doesn’t go into any detail:

“Construction Industry Scheme (CIS) Reform: Implementation Date
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.”

Following the link given merely takes you through to the “New CIS” page (which has been there for some time) and the only change to this page, as far as I can see, is that the date has been changed from 6 April 2006 to 6 April 2007.

No mention is made of the comment made by the Treasury Minister regarding “a full joint testing programme for the new verification services and monthly contractors' returns, promoting the use of the new employment status declaration and analysing areas of non-compliance in the industry.” And guess what? No mention of “during this period, HMRC will step up its level of advice and compliance activity with the industry”.

Anyone would think that they didn’t want us to know…

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By John Murphy C.A.
21st Oct 2005 17:52

Another Fine Mess.....
How untypical of HMRC to give loads of hype to putting the onus on contractors to decide employment status by 6th April 2006 and then postpone implementation of the new CIS scheme for another 12 months.

Many contractors are concerned that good tradesmen presently regarded as self employed will simply move on if their employment status changes because of the new rules, resulting in contractors scratching around trying to find quality tradesmen to satisfy their ongoing workload.

Here's a thought - what if HMRC not only dictated the status of new starts but that of existing subcontractors as well. That way, good tradesmen would be less inclined to move on because decisions on their employment status would not depend on how lenient the new contractor decides to be when interpreting his or her employment status. Penalties are all very well but they don't work if the business has no intention of honouring its legal obligations in the longet term anyway.

I wouldn't normally advocate giving more powers to HMRC but it would make life so much easier all round.

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By AnonymousUser
23rd Oct 2005 17:33

No need
There is now now no need for a CIS. There is no reason why the Construction Industry cannot be brought in line with other Industries. The only reason for its existence is now dead and buried (the lump). Health and safety regulations mean that you cannot go from site to site without the right paper-work.
Perhaps the Government are actually considering this mode of action??????
The CIS was originally set up so that there would be "contractors" and "sub-contractors" both would be self-employed, but it has always been the obligation of the "contractor" to assess whether the "contract is of SE or PAYE.
Unfortunately any course of action by the government is now controlled by "lets get the most money we can" rather than "lets sort out the great big messy, unfair tax system.

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By Mikeparr
21st Oct 2005 12:16

What a fine mess.......
Hopefully it will become clear as time passes as to who does what when how and why

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By flasher
21st Oct 2005 14:02

Comptroller & Auditor General's comments
Did the Comptroller & Auditor Generals comments in his report on the Inland Revnue accounts for 2004/05 have anything to do with the postponement -
"In my report on the Inland Revenue accounts last year, I noted that the Scheme was to be introduced in 2006, a year later than planned. There is a tight timetable for the introduction of the IT systems needed to support the new Scheme and the Department have tried to take on board the lessons of Tax Credits in managing this risk"
There has been a lot of bad press on Tax Credits lately

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By User deleted
21st Oct 2005 10:56

Revenue press release due today
I have spoken to our local CIS /status inspector this morning who has confirmed the deferral to 2007. At this stage it is not clear whether the educational talks will proceed, but there seems little point. He is not a happy man !! We have also invested a lot of time and energy in the new system for which we will not get a return. Who knows wheteher next year's scheme will be the same as this year's.

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By User deleted
21st Oct 2005 11:39

Found it - buried in Hansard!
It was a written answer from John Healey (Treasury Minister) to a Parliamentary Question on Wednesday 19 October:

"Online Tax Collection

Dr. Cable: To ask the Chancellor of the Exchequer whether he expects the April 2006 deadline for online tax collection for sub-contractors to be met; what arrangements are being made to assist operators who are unable to work the new system; and if he will make a statement. [17663]

John Healey: Reform of the Construction Industry Scheme (CIS) was announced in Budget 2003 and legislated in the Finance Act 2004. From the outset, the changes have been developed in close consultation with industry representatives, in particular through the work of the Construction Industry Reform Implementation Panel, which met again today.

The industry has agreed to strengthen cooperation with HM Revenue and Customs including in planning a full joint testing programme for the new verification services and monthly contractors' returns, promoting the use of the new employment status declaration and analysing areas of non-compliance in the industry. And the Government have also agreed with the industry to extend from April 2006 to April 2007 the period for implementation of the final elements of the new CIS.

During this period, HMRC will step up its level of advice and compliance activity with the industry, including new interactive online software and up to 70 telephone advisers to provide help with employment status from next month."


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By AnonymousUser
21st Oct 2005 11:48

Extended or not?
There seems to be some confusion. From the opening comment "defer the controversial overhaul" it would appear that things are to remain as they are for a further year. However, "And the Government have also agreed with the industry to extend from April 2006 to April 2007 the period for implementation of the final elements of the new CIS." suggests that this is not so. What exactly are the final elements and what, if anything, is to change in April 2006?

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By SimonP
21st Oct 2005 14:13

I don't care ...
... 'cos I got 2 CPD points for attending a seminar on New CIS and I'll get even more when they do it again. I'm just glad I haven't given seminars to my clients they would have been so happy to have paid me and got nothing back.

At least there will be 12 months for everyone to get their house in order. Maybe, at last, HMRC are learning from the Tax Credits fiasco. As recently as a fortnight ago I was being told by Revenue staff that they were unaware of the details behind the new scheme which left less than 6 months to train HMRC staff, contractors and accountants.

What a load of doggy dos it is anyway. This is just more and more red tape for employers/contractors with extortionate fines for getting it wrong. Yet another Labour stealth tax.

And one must not forget that the powers-that-be wanted to use the acronym NCIS which just goes to show the thought that goes into these changes for the sake of changes.

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By User deleted
21st Oct 2005 10:13

Announcement?
Does anyone have a link to the HMRC's official announcement? At the time of writing, I can't find anything on their website or a press release confirming this.

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By User deleted
21st Oct 2005 12:12

Does this help?
The only other reference I can track down is on the Construction Confederation website

My local inspector is also very unhappy - apparently they heard rumours yesterday which have been confirmed in an internal briefing note this morning.

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By c.methley
21st Oct 2005 14:59

Software
Those of you who have amended you systems in advance of the changes what software suppliers are you using?

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