Construction – CIS Online Services

by Mike on August 5, 2007

As you might know, my company is a supplier to the UK Construction Industry.

On 6th April 2007, the “New Construction Industry Scheme” was launched. This aptly titled “new scheme” entirely replaced the old one, bringing with it a new set of rules and regulations by which all construction contractors must abide.

One of the main key points is that construction workers will no longer be issued with a “CIS card” (a special card for the self-employed), but instead have to provide identification information which needs to be checked online (using our software, for example), or over the phone. HM Revenue & Customs will then tell the contractor how much to deduct from the subcontractor’s payment, either nothing, 20% or 30%. One of the reasons for this is to clamp down on benefit fraud and immigrant workers avoiding tax. Apparantly.

The requirement for a contractor to provide a statement of deduction (formerly known as a CIS 25) has been removed. As has the yearly return, replaced instead by a monthly return.

Contractors also have to ensure that they have carefully considered the employment status of every single worker that works for them. Oh yes, every single worker. Get it wrong, go to jail, do not collect £200. Instead, a £3,000 fine per worker, per month can be levied.

Our company has two new products which have full HM Revenue & Customs recognition to perform those mandatory verifications and monthly returns, and we have been involved in creating a third product to handle employment status (provides advice and evidence of the working arrangements).

So that’s my background, at least.

New CIS is a Government IT project. Originally set for April 2006 (even that date was after having been put back before), it was put back to April 2007 after a campaign by The Construction News (Countdown to Crisis) highlighted some severe concerns for implementation of IT systems.

The new scheme is mostly in place, but there were a lot of issues amongst which – downtime, data not going out to contractors, confusion as to the new rules, difficulty in accepting use of software, conflicts between online services and offline services, potential for online systems hiccups getting people’s tax treatment status wrong (so some workers get 30% unexpectedly deducted from their pay)… but I am pleased to report that most of the technical issues have been resolved. That is, at least, good (by Government Standards), for a Government IT project and new tax regime.

HM Revenue & Customs have said that they wouldn’t fine anyone until October. How nice of them. (note: non compliance prior to October may still affect your compliance record).

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