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Online filing on the cards for CIS returns

8th Jul 2014
Freelance journalist
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Contractors in the construction industry will have to file tax forms online and do an electronic check that sub-contractors are paying the right tax, HMRC has proposed.

Submitting electronic information about payments to sub-contractors and tax paid will make the construction industry scheme (CIS), easier and cheaper to run for businesses.

The suggestions are made in a consultation document on how to improve the CIS, which was introduced to prevent tax evasion in the construction industry.

The construction sector contributes nearly £90bn or 6.7% of the UK’s gross domestic product, and employs 1.3m people, HMRC says.  About one million businesses are registered with the CIS.

Special tax rules for the construction industry were first introduced in 1972.

HMRC says it's consultation proposals could "substantially reduce" costs for businesses in the CIS; give them better control over their cash flow and make it easier for sub-contractors to be paid in gross.

"Many of these improvements will create efficiencies for both CIS contractors and HMRC, but to fully realise these benefits we are consulting on requiring all businesses to file all information online," wrote David Gauke, exchequer secretary to the Treasury in the consultation.

HMRC says it would upgrade its IT before making online CIS returns mandatory.

Now, about 80% or 120,000 contractors file their CIS returns online. About two thirds of contractors in the scheme are employers.

HMRC has suggested that contractors who are also employers could use the real-time information (RTI) system for sending information about tax and national insurance deduct from employees’ wages to HMRC when they are made for sending CIS returns as well.

"This could simplify the filing process and bring immediate benefits to small companies without gross payment status, as CIS deductions could then be automatically set against their in-year PAYE," HMRC says in the consultation.

Doing more online may also speed up re-payments to contractors who have paid the wrong tax, HMRC says.

Now, sub-contractors who have their tax deducted by employers must make a repayment claim at the year end. If there are errors or inaccuracies on the monthly returns from contractors or because the subcontractor has incomplete payment and deduction statements issued by contractors, there can be delays in re-payments, HMRC says.

People have until 22 September to comment on the consultation. Members of the Chartered Institute of Taxation who want to comment can email [email protected].

Replies (4)

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By Carolynne
11th Jul 2014 15:47

I am INDIGNANT!!! Do an electronic Check for HMRC!!!!

I have no objection to filing CIS returns on-line, as I have been doing this for a number of years now.  But I draw the line at doing electronic checks, to check that the subcontractor being paid, are paying enough tax over the HMRC.  That is none of my business.  It surely is up to HMRC to check if a sub contractor is paying enough tax.  Or have I misunderstood the line here?

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By carnmores
14th Jul 2014 13:34

whats all the huff and puff about

we do all our CIS online incuding authorisation , its a piece of cake , yes i think its in the wording i presume they dont want pople ringing up to determine the right %age deduction

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By coolmanwithbeard
16th Jul 2014 07:42

agree with Carnmores

And as Moneysoft is the recommended PAYE package on here, where it's size appropriate, then all those users have CIS included already at no extra cost

From the outset there has been suspicion of HMRC requirements and suggestions for online stuff and we have all seen problems but often there are advantages too and we need to look for those - either advantages for us as practitioners or our clients. I was there at the start of ELS (even got a free HMRC modem) as it meant that I knew all my tax returns were in and correctly in and not sat in a pile at the tax office awaiting data entry which might put it in wrong


CIS is similar - it's online I have an audit trail I know it's in and accepted

Thanks (1)
By carnmores
16th Jul 2014 17:39

spot on Coolman

its a piece of cake and makes our life considerable easier

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