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New Construction Industry Scheme Seminar

Date: 13th November 2006

At a seminar held jointly with solicitors, Follett Stock, at the Hall for Cornwall on Monday 13 November 2006, Ian Moores, Lang Bennetts’ senior partner, provided an overview of the new construction industry scheme (CIS) which will be effective from April 2007. The scheme, which represents a radical overhaul of current arrangements, will see the abolition of subcontractor registration cards and tax certificates. Instead:

• Subcontractors will need to be verified with H M Revenue & Customs.

• Those who would previously have had a tax exemption certificate will be referred to as “registered for gross payment”. Others will be known as “registered for payment under deduction”. A third classification will be introduced for those subcontractors who can not be verified with H M Revenue & Customs and are “unmatched”. A new rate of deduction of 30% will be introduced for these unmatched subcontractors.

Verification
When a contractor takes on a subcontractor under the new regime, the subcontractor will provide basic identity details which the contractor will check with H M Revenue & Customs to determine whether the payment should be made net or gross. The contractor will not then need to check every time a payment is made to the subcontractor.

Monthly Return
All contractors will be obliged to make monthly returns under the new scheme summarising payments made under the CIS. Ian highlighted the need to review systems now and ensure that they will gather the appropriate information from subcontractors, in order to be able to report monthly within the tight deadlines set by the new scheme and avoid the draconian penalty regime for late submissions and errors.

Employment v Self Employment
One of the requirements of the new scheme will be for contractors to sign a monthly declaration that none of the payments relate to a contract of employment. Martin Follett, of Follett Stock, outlined the responsibilities of contractors to question each and every subcontractor engagement and confirm that it is not one of employment. Martin reviewed the key aspects in determining employment from self employment, providing an essential overview of relevant case law.

How we can help
We can advise on the CIS whether you are a contractor or a subcontractor. We can also give further details on the reform taking place next year. Please do not hesitate to contact Ian Moores. Our payroll bureau can provide administrative support to contracts struggling to deal with the construction industry payments, please contact Karen Rowland.

Martin Follett can be contacted at Follett Stock.