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CIS and the numbers game

10th Dec 2015
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Wendy Bradley looks at the draft legislation affecting the construction industry scheme and finds the proposals a bit of an empty shell.

The draft legislation changing the construction industry scheme is a bit of a damp squib. The changes, which can be found here, make it easier for subcontractors to retain gross payment status. Essentially the requirement to have your tax affairs in order and to have answered any HMRC enquiries is replaced by a simple requirement to be up to date with your CIS and PAYE payments and returns.

This seems to be all that is left of a wider suite of changes to the construction industry scheme, which were consulted on last year. Various commentators noted at the time that the changes seemed to be aimed mainly at reducing HMRC’s costs. Encouraging those subcontractors who might qualify for gross payment status but were risk-averse (or using HMRC as a kind of savings bank by having their tax payments deducted up front) to move to gross status would save HMRC from having to calculate year end repayments.

Some of the proposals seem to have been quietly postponed - turning off the telephone verification system, for example, has now been pushed back to 2017 “to allow users to experience the improved system” HMRC says it has in place. The requirement to make CIS returns electronically rather than by post seems to have been accepted by the industry as an inevitability, but there is some delay while the necessary support for those unable or unwilling to use computers is put in place.

What remains, in this draft legislation out for technical consultation, is a loosening of the requirement to be a completely compliant taxpayer in order to keep gross payment status. So a cash flow problem that makes an unrelated payment a few days late or an unrelated enquiry from HMRC will no longer be a danger to gross payment status.

Whether the changes in gross status compliance thresholds brought in by this legislation will have any significant impact on businesses is an interesting question. The accompanying explanatory memorandum says that the impacts are contained in the Tax Information and Impact Note (TIIN) published on 10 December 2014 and available on the HMRC website.

But if you actually look at the TIIN, the “impact on business including civil society organisations” concludes with the paragraph “Estimates of the impact on businesses will be established and published once details of the measure have been finalised.”

If the publication of a draft statutory instrument which will go before Parliament and be passed on the nod doesn’t count as “finalised” then, we might reasonably ask ourselves, what on earth does?

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Rebecca Cave will shortly be producing a report for our sponsor Keytime on what the new Autumn Statement and Finance Bill 2016 measures will mean for small businesses.

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blue sheep
By NH
12th Dec 2015 11:30

Good news
I think this does make a difference.

We have many clients that on paper always pay their CT late because they are waiting for hmrc to process a refund and now that should not hold back a gross payment application

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By AndrewV12
12th Dec 2015 12:35

I thought CIS was introduced because ...

Extract above

The changes, which can be found here, make it easier for subcontractors to retain gross payment status. 

I always thought the CIS scheme was introduced so that Sub contractors did not appear and disappear without paying some tax, if more Subcontractors retain their gross payment status, is there a chance down the line, no tax will be paid over to HMRC.   

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