Industry is 'totally unprepared' for CIS

Construction companies are "totally unprepared" for April's introduction of the Construction Industry Scheme (CIS), according to a study by accountancy group KPMG.

Its survey of 500 construction company staff found 89% had not contacted their subcontractors to discuss the changes, while 94% of employers had not prepared any guidance for their own staff.

Alan Nolan, director of KPMG's Employment Tax Group, said: "The majority of mid-tier construction firms and their advisors are simply nowhere near where HMRC [HM Revenue & Customs] think they should be in readiness for what is a fundamental change, carrying both commercial and financial risks for every construction business."

It is feared the scheme, which aims to prevent tax evasion by making subcontractors clarify their status with HMRC, will also be harder to operate. More than half of respondents (57%) said it would be harder to work with than the current system.

But Liz Bridge, director of taxation at the Construction Confederation, dismissed the survey as scaremongering. "Contractors don't have to be ready on 6 April because HMRC will give them a list of the subcontractors they've used in the past two years. It is only when a subcontractor is brand new that anybody has to do anything unusual."

She said anticipation of the changes was worse than the reality because HMRC hasn't allowed live trials of the new scheme. "The software has never run with a real person at each end. It's far more likely that IT systems will crash in May when the first returns are made than contractors have problems verifying subbies in April."

Her concern is borne out by the KPMG survey, which found that 46% of respondents hadn't contacted software providers for advice on how to make online returns under the new scheme.

[Contract Journal, 7th Feburary 2007, p 2]