Access Accounting - Blog

Software options to meet new CIS rules

When one poor contractor complained that he hadn’t heard anything about the new CIS rules, I couldn’t help but feel sorry for him. Had his accountant not mentioned this to him? He or she should have been more on the ball if not – or get another accountant. After explaining what the new CIS was all about, I thought it might be helpful....

The countdown begins: new CIS only one month away

The countdown to the forthcoming CIS regulation changes is now well underway, with only a month to go until it is in place and contractors can register for on-line submission.

More than 250,000 contractors will be affected by the new legislation, which applies not only to those in the construction industry but also the wider business community. In fact any business which spends on average, £1m or more on construction will come under the clutches of the scheme. And with subsequent fines of up to £3,000 for inaccurate returns or not producing the monthly Sub-contractor Payment & Deduction Statement, this should be incentive in itself to make sure the data is correct.

Such automatic monthly penalties could turn out to be very costly indeed. The onus has been placed well and truly on the contractor, whom you can’t help but feel sorry for.

At Access Accounting we have received a number of calls about the £3,000 fine – being hit firmly in the pocket does make you sit up and listen. It has to be said that these penalties don’t come into place until October 2007 – there is a little breathing space. However, look how quickly the last 12 months have gone; it was last April when these changes were originally going to be put into place. Time waits for no man as they say…

To verify or not verify – that is the question

I was talking to a contractor the other day who asked a very valid question – ‘I have so many sub-contractors on my books; do I need to verify every one of them?’

That’s a very good point as it is only sub-contractors that have been recently recruited that need to be verified. You don’t need to verify if a sub-contractor has been paid since 6th April 2005 AND they provided you with either a CIS4(T), CIS4(P) or a tax certificate (CIS5 or CIS6). Apart from the CIS4(P) – the registration card – the other forms of evidence need to have an expiry date of at least April 2007. These sub-contractors should appear on the CD that HMRC sent out to you and it's worth checking that the details you hold do match, and that you have the correct tax status held against each sub-contractor's record.

As my friend commented, ‘This is going to be a time consuming process.’ There seems no doubt about that….

Kevin Misselbrook, customer services director

The importance of matching

HMRC will be sending contractors an additional CD of sub-contractors in March – they will also be mailing sub-contractors to confirm the details that are currently held on HMRC’s files.

Hopefully many businesses will be well underway with the matching process, following the first batch of records that HMRC sent out in November. However, this process could be quite time consuming in the first instance.

For the contractor, one of the chief problems in matching the data on their system to that of HMRC’s is likely to be the trading name or even something as simple as a space in a field – double-barrelled names will need a hyphen! Incorrect data could mean an error in the deductions made from a sub-contractor’s payments. Not good for relationships between the contractor and sub-contractor. (in fact there are three items which must match HMRC’s database – the Unique Taxpayer Reference, the sub-contractor name and NINO/CRN).

If there are any discrepancies, the contractor needs to talk to the sub-contractor not HMRC. In fact we’d be very interested to hear your personal experiences of matching the data – any feedback for others who are still going through the process I am sure would be greatly received!

For more information on Access CIS software please visit their website.

CIS deadline looms

Those working in the construction industry may need reminding further that the new construction industry scheme (CIS) will be implemented next month.

Last month, HM Revenue & Customs (HMRC) launched a campaign to remind contractors of the changes in the law which will allow contractors to pay sub-contractors and assist with taxes.

Following concern from recruiters about whether HMRC's systems would be able to handle the changes, a spokesman told Recruiter magazine: "Our IT systems have been designed to cope with the changes arising from new CIS. We can confirm that we are ready to go live on April 6th."

He added that HMRC's systems has been exhaustively tested but would continue to be examined before the scheme comes into place. Changes to the scheme, announced by the chancellor in his 2003 Budget, were initially supposed to come into force in April 2005; however, the industry voiced concern that setting the date so early would not leave enough time for companies to prepare for the scheme.

As a contractor, what are your thoughts on the changes to the CIS rules? Are you ready for April 2007 - what impact will it have on your business? Let us have your comments.