...Construction Industry Scheme...
From 6th April 2007 a new Scheme has been introduced to deal with the construction industry. The changes are primarily to simplify administration, however there is a new penalty system in operation. There is no change to the requirement for contractors to ensure that any sub-contractor is genuinely self employed.
Contractors are no longer required to issue vouchers or to see registration cards but may need to obtain verification from HMRC of the sub-contractor’s tax status. For new sub-contractors the contractor must contact HMRC for sub-contractor status. This can be done either over the telephone or online.
Information required for verification is the sub-contractor’s name, address, Unique Tax Reference number and National Insurance number or company registration number. Once verified the contractor may pay the sub-contractor in the usual way by deducting 20% or by paying without tax deduction. If the sub-contractor is not verified by HMRC then a higher deduction rate of 30% must be used. The deduction usually applies only to labour.
The contractor must forward to the sub-contractor a statement of all payments and deductions. These statements must be retained by the sub-contractor as evidence that CIS tax has been deducted.
In addition the contractor must complete a monthly return in the required format. The return can be completed online or by post. There will be penalties invoked for late submission of the monthly return of £100 per return for every month it is late, even if the return is zero. If returns are not filed for 6 months the penalty is £2,100, for 12 months it rises to £7,800 !
For further information contact Mead Turner & Co Ltd.