Tories plot CIS overhaul as costs escalate to £500m

Tory party leaders are considering reforms to the CIS tax system if they win the next General Election.

Senior Conservative MPs have been talking to industry experts as it was revealed this week that CIS has cost at least £500m to implement.

Howard Royse, the construction industry head for the Institute of Chartered Accountants, has calculated the cost of the scheme for CJ.

Royse has also been contacted by Tory officials, who are looking at the impact of the scheme.

He said: “Conservative MPs are now looking at the whole CIS question with a view to what changes may be needed. My figures show just how costly the scheme has been so far.”

Changes to CIS could form part of a radical tax overhaul promised by shadow chancellor George Osborne. Osborne said: “The process and the machinery needs to change.”

Royse said that contractors have been hit for £90m under CIS in fines and the cost of appeals since its introduction in April 2007.

That figure is on top of the estimated £100m in set-up costs and £310m in ongoing costs to administer the scheme. But a spokesman for the HMRC rejected Royse’s calculations on how much the scheme has cost industry.

“A number of assumptions have been made with regard to the estimates and basis of the calculations, which HMRC does not agree with.

“Figures from the KPMG costings have been used as a baseline for the cost of the previous scheme, but not for costing the operation of the new scheme, which show significant savings.

“Additionally, the cost of penalties for failure to submit returns (for which the quoted figure is much higher than has actually been charged) is included in the total as a cost of operating the scheme,” he said.