As of 6th April this year the paper CIS300 tax return has been replaced by the requirement for an electronic submission to HMRC. It is estimated that 25,000 contractors will be impacted by this change and will need to have amended their procedures before the first submission deadline on 19th May.
What is the CIS and who does it apply to?
The Construction Industry Scheme (CIS) is a tax deduction scheme in which contractors deduct money from a subcontractor’s payment and pass it on to HMRC. The deductions count as the subcontractor’s tax and national insurance, which before the introduction of the CIS, would have been easily avoided.
Contractors must send a complete return of all payments made to all of their subcontractors within the scheme in the preceding tax month. As well as contractors and subcontractors, the CIS applies to any organisation that has a high annual spend on construction. So even if they are not technically a construction company, if they spend over £1 million on construction in a tax year they will be required to make these monthly submissions to HMRC.
Changes to the CIS
In the 2014 budget the Chancellor announced the Government would be consulting on operations to improve the CIS, and in 2015 the following changes were announced:
- Contractors were no longer required to submit monthly returns to the HMRC when they had not made any payments to a subcontractor in the previous tax month.
- The requirements for partnerships to gain ‘gross payment status’ were relaxed.
- Further changes were announced with effect from rom 6th April 2016; Move to paperless filing – One of the most significant changes was the mandatory online filing of monthly CIS tax returns. Whilst many contractors had made the change to paperless submissions prior to it becoming mandatory there are estimated to be around 25,000 contractors who haven’t already made the change. The HMRC has pledged to be understanding where the switch does not take place in exceptional circumstances, for example where a contractor can’t access the internet or is unable to fill out online forms due to age or ill-health.
- Simplified compliance tests for gross payment status – A director’s individual assessment obligation no longer forms part of either compliance test when determining whether or not a company qualifies for gross status.
What’s next for the CIS
In addition to the changes made this year, the Government has stated that the verification of subcontractors should be moved online completely by April 2017. At present this can take place either electronically or by phone. In anticipation of this change the HMRC has made improvements to its online filing system. Filing late or incorrect records can result in fines from the HMRC of up to £3,000.
Need a Hand?
If you’re a contractor and need help or advice with the CIS in general, filing electronic returns or managing payments to subcontractors call us today on 0117 3790810. We have a full suite of CIS software which enables us to submit construction contractor’s monthly returns on behalf of our clients.
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Categorised in: Industry News
This post was written by Steph Roffey