Construction Industry Scheme - some problems
The way the new rules work it is likely that a number of businesses may be moved from gross to net under CIS. There is a reason to be worried.
One of the key aims of the new CIS scheme was to improve compliance in the construction industry.
Under the new scheme, HMRC may raise a determination transferring a subcontractor from gross to net payment status at any time if HMRC believes that were the subcontractor to apply for registration for gross payment at that time this would be refused.
From last year HMRC has a programme for businesses to review their tax compliance over the previous 12 months. If there are unacceptable breaches the businesses receive a determination moving them to net status and notice of right of appeal. This is a rolling programme to ensure every business is checked once a year.
To pass the compliance test, the trader and any business partners (or the company and each of its directors) must, during the 12 months up to the date of the application, have done all of the following subject to some small margins for error.
- Completed and returned all tax returns sent.
- Supplied any information to do with the tax that may have been requested.
- Paid by the due dates
- all tax due personally or by the business
- all National Insurance contributions (NICs)
- any PAYE tax and NICs due as an employer
- any deductions due as a contractor in the construction industry.
This is likely to be a real problem for businesses.
