CIS shake up

The measures should result in more subcontracting businesses being able to achieve and maintain gross payment status so improving their cash flow. These changes are to be implemented in stages.

CIS: What is changing?

From 6 April 2015 the following amendments were made:

• The requirement for a contractor to make a return to HMRC even if the contractor has not made any payments in a tax month will be removed. Contractors may make a voluntary nil return but will no longer be obliged to do so.
• The requirements for joint ventures to gain gross payment status will be relaxed where one member already has this status and that firm or company has a right to at least 50% of the assets or the income or holds at least 50% of the shares or the voting power in the joint venture.
• Earlier repayments can be made to liquidators in insolvency proceedings. Currently where a subcontractor is a company, no repayment of any amount deducted and paid over to HMRC by a contractor can be made to the subcontractor until after the end of the tax year in which the deduction was made. These rules will be amended so that in certain cases where the amount deducted by the contractor is excessive, a repayment can be made during the tax year.

From 6 April 2016 further changes are proposed:

• Mandatory online filing of CIS returns will be introduced with the offer of alternative filing arrangements for those unable to access an online channel by reason of age, disability, remote location or religious objection.
• The directors’ self assessment filing requirements will be removed from the initial and annual compliance tests.
• The threshold for the turnover test will be reduced to £100,000 in multiple directorship situations.

From 6 April 2017 mandatory online verification of subcontractors will be introduced.

What should you do?

If we look after your CIS requirements, you need not do anything. We will advise all our CIS clients individually if there is anything else they should consider.

If you complete your CIS returns in-house or have a third party carrying this out, you should make sure that both are familiar with the changes. Filing late or incorrect CIS records can result in fines of up to £3,000 pounds with HMRC.

David Sharp, Head of Property and Construction at Rouse Partners commented, “It is important that you are aware of these changes when making CIS returns, however I fear that it is unlikely to significantly reduce the main bulk of admin associated with making CIS returns. That said, this is certainly a step in the right direction.”

If in doubt about whether or not a specific activity falls under CIS, it is recommended to refer to HMRC’s guidance or to contact our team of construction specialists.