NewswireToday - /newswire/ -
Kenilworth, Warwickshire, United Kingdom, 2007/03/28 - The Construction Centre.co.uk today joined the debate surrounding the new Construction Industry Scheme (CIS) which is finally due, after several delays, to come into effect for contractors next week on 1st April 2007.
The scheme is the latest revision to a policy originally introduced in 1972 to eradicate income tax evasion by construction workers. However the new CIS has caused widespread debate throughout the building industry as to whether the scheme will actually benefit businesses across the UK.
In essence there are two main changes to current contractor and sub-contractor practices. Firstly, the ID cards currently used by sub-contractors will be replaced by a verification service, which requires the contractor to determine the tax payment status of the sub-contractor, prior to any payments being made. Secondly, instead of using the voucher system, the contractor will need to send a monthly return to HMRC (Her Majesty’s Revenue & Customs), which contains a declaration stating that payments included in the return have not been made under a contract of employment.
The CIS will affect over 200,000 registered contractors and nearly a million sub-contractors in the UK and the administration of the new process has been estimated at a cost to the industry of £30 million per year with set up costs reaching £60 million. Despite these figures, the Treasury has estimated the new scheme should save businesses £22 million per year, however many disagree and the burden of these costs is likely to hit smaller businesses and have a broader impact on them than larger firms.
Richard Simmons, Managing Director of the Construction Centre and a property developer for over 30 years said “This is all about the Government stopping people who wish to be self employed from being self employed. It forces contractors to take everyone as “employed” thus being subject to employment liabilities – it is a charter for tribunals.”
He continued “Most house builders simply want to get on with the job and engage the people they need to complete a project. From 1st April contractors will now have to spend time and money in assessing each sub-contractor using the online system and then work out pay scales and tax implications as to whether a worker is employed or self-employed before they even do any work. Returns will then need to be submitted to HMRC on a monthly basis – it’s an administrative nightmare.”
In order to force the industry to comply with the new legislation HMRC have implemented costly fines and penalties to those who incorrectly submit returns or do not meet the new requirements. This will make it imperative for all contractors to understand and implement the new changes from April 1st without question.
The effects of the CIS may have far reaching implications and as with any new system, it may take the construction industry some time to adjust. However, many have seen the new scheme as a way for the government to simply raise more revenue and to further increase the administration burden on the contractors shoulder.
Contractors can call the CIS employers helpline on 0845 366 7899, 8am-8pm, 7 days a week
Sub-Contractors can call the CIS employers helpline on 0845 300 0581, 8am-8pm, 7 days a week
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Targeted at consumers and the building industry, The Construction Centre is an encyclopaedic directory containing over 10,000 UK product manufacturers. Additionally there are over 50,000 contact details for merchants, industry professionals, tradesmen and contractors. Local Authority planning websites, trade publications and jobs can also be directly accessed from The Construction Centre.
Based in Warwickshire The Construction Centre is part of the UK250 Ltd group.