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Is the Construction Industry Scheme (CIS) due for a review?

The UK construction sector is a vital contributor to the UK economy and a key driver of growth. Despite the challenges the sector has recently faced, construction continues to be one of the largest UK sectors and a key source of the UK’s gross domestic product and employment.

According to a report by the department for Business Innovation and Skills published in July 2013, the Construction industry “contributes almost £90 billion to the UK economy (or 6.7%) in value added and comprises over 280,000 businesses covering some 2.93 million jobs, which is equivalent to about 10% of total UK employment.

The Construction Industry is therefore vital to the UK economy, yet current tax legislation appears to be rather cumbersome and many contractors and sub-contractors have experienced difficulties with the administration of the current Construction Industry Scheme referred to as CIS.

For these reasons HM Revenue & Customs is working with leading experts in the industry to simplify the current tax system. The main objectives are as follows:

•  Make it easier for businesses to comply with their income tax obligations, and;

•  Reduce the regulatory burden through making the scheme simpler to administer.

Small businesses especially, believe that the system should be simplified and make it easier to obtain a gross payment certificate which would greatly improve the cash flow of many small contractors and reduce the administrative burden. On the other hand the current Construction Industry Scheme is effective in ensuring that construction businesses pay income tax. Finding the right balance is therefore not easy.

In many cases cash transactions represent a regular feature when payments are made to sub-contractors, which is difficult to eradicate. Yet, many contractors deal in cash not necessarily for tax reasons but in order to avoid the administrative burden of running the Construction Industry scheme in its full measure.

It will be interesting to see how the system will be improved. We will keep you informed on developments. If you need assistance with the administration of the current Construction Industry scheme or would like further information, please call the office on 020 88575781, we will be happy to help.

 

 

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