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Firms must get up to speed on CIS or risk losing status
22:00 26 Oct 2005
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Construction firms are being warned that their Construction Industry Scheme (CIS) status will be under threat if they do not get their compliance up to scratch.
Alan Nolan, director of tax and people at KPMG, provider of audit, tax and advisory services, has warned that construction firms are likely to receive visits from HM Revenue & Customs (HMRC) even though it was announced last week that the new CIS will not now be implemented until April 2007, a year later than the planned start date.
"HMRC will be challenging companies on their operation of CIS, PAYE, reporting of benefits in kind and their accuracy of employment tax returns, and this will have an impact on their CIS certificates," he told CJ.
"This is a period of grace that we need to take advantage of. If companies take their foot off the gas in preparing for the new CIS, they could be caught napping.
"Many businesses' certificates expire in August 2006, and if there is poor compliance, they won't be renewed. Imagine the commercial damage it would cause if your firm faced 18% deductions," added Nolan.
The delay in introducing the new CIS comes after months of industry lobbying, during which the Joint Taxation Committee withdrew from talks with HMRC in protest at its refusal to delay the scheme (CJ 7 September). Concerns over software availability and compatibility were the main areas of dispute.
However, following the postponement, the industry has now agreed to strengthen co-operation with HMRC. It is to plan a full joint testing programme for the new verification services and monthly contractors' returns. It will promote the use of the new employment status declaration and analyse areas of non-compliance in the industry.
HMRC will also step up its level of advice and compliance activity. It has doubled the number of compliance staff, and is also reorganising its construction team, said a spokesman.
Kathryn Hiddleston, partner at business adviser Grant Thornton, said that "common sense" had prevailed about the delay, adding she was pleased that HMRC intends to concentrate on employment status.
"It has always been unacceptable that firms which categorise their workers properly are undercut by contractors that blatantly flout the rules to gain an advantage in their labour costs," she said.
"This is an opportunity to create a level playing field for all. I hope HMRC will apply consistent treatment to all sizes of contractor and to all areas of the country, something that we have been urging the Treasury to instigate for some time."
Find out all you need to know about the new CIS at a CJ/Lexis Nexis conference in London next Tuesday (1 November). Speakers include HMRC's CIS reform specialist, as well as practical advice on getting your business ready and retaining your CIS certificate. Visit www.conferencesandtraining.com/cis or call 020 7347 3574.
Alan Nolan, director of tax and people at KPMG, provider of audit, tax and advisory services, has warned that construction firms are likely to receive visits from HM Revenue & Customs (HMRC) even though it was announced last week that the new CIS will not now be implemented until April 2007, a year later than the planned start date.
"HMRC will be challenging companies on their operation of CIS, PAYE, reporting of benefits in kind and their accuracy of employment tax returns, and this will have an impact on their CIS certificates," he told CJ.
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"This is a period of grace that we need to take advantage of. If companies take their foot off the gas in preparing for the new CIS, they could be caught napping.
"Many businesses' certificates expire in August 2006, and if there is poor compliance, they won't be renewed. Imagine the commercial damage it would cause if your firm faced 18% deductions," added Nolan.
The delay in introducing the new CIS comes after months of industry lobbying, during which the Joint Taxation Committee withdrew from talks with HMRC in protest at its refusal to delay the scheme (CJ 7 September). Concerns over software availability and compatibility were the main areas of dispute.
However, following the postponement, the industry has now agreed to strengthen co-operation with HMRC. It is to plan a full joint testing programme for the new verification services and monthly contractors' returns. It will promote the use of the new employment status declaration and analyse areas of non-compliance in the industry.
HMRC will also step up its level of advice and compliance activity. It has doubled the number of compliance staff, and is also reorganising its construction team, said a spokesman.
Kathryn Hiddleston, partner at business adviser Grant Thornton, said that "common sense" had prevailed about the delay, adding she was pleased that HMRC intends to concentrate on employment status.
"It has always been unacceptable that firms which categorise their workers properly are undercut by contractors that blatantly flout the rules to gain an advantage in their labour costs," she said.
"This is an opportunity to create a level playing field for all. I hope HMRC will apply consistent treatment to all sizes of contractor and to all areas of the country, something that we have been urging the Treasury to instigate for some time."
Find out all you need to know about the new CIS at a CJ/Lexis Nexis conference in London next Tuesday (1 November). Speakers include HMRC's CIS reform specialist, as well as practical advice on getting your business ready and retaining your CIS certificate. Visit www.conferencesandtraining.com/cis or call 020 7347 3574.
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