The new Construction Industry Tax Deduction Scheme is known as the 'revised CIS' scheme and replaced the old 'CIS' scheme. Everyone who carries out work in the Construction Industry Scheme must hold a registration card (CIS4) or a tax certificate (CIS6). Certain larger companies use a special certificate (CIS5).
A small business that does work only for the general public and small commercial concerns is outside the scheme and does not need a certificate to trade. If, however, it engages other contractors to do jobs for it, the business would have to trade under the scheme as a contractor and deduct tax from any payment made to a subcontractor who did not produce a valid (CIS6) certificate. If in doubt, consult your accountant or the Inland Revenue direct.
Under the revised scheme, registration cards, tax certificates and vouchers will no longer be used. Subcontractors will normally register with the Revenue. There will be two types of registration, registration for gross payment, applicable to those who previously qualified for a tax exemption certificate, and registration for payment under deduction, applicable to all other subcontractors. The three-year qualifying period for gross payment will be reduced to one year (but the Revenue may cancel registration at any time where the qualifying conditions no longer apply, or where the rules have been breached). Unlike the present scheme contractors will be able to pay un-registered sub-contractors, but the deduction rate will be much higher (probably around 30%).Those who hold a subcontractor's certificate when the new provisions come into effect will be treated as being registered for gross payment and those who hold a registration card will be treated as registered for payment for deduction. Subcontractors holding temporary registration that expire before 6 April 2007 will have to register in the same way as new applicants.
For new workers, contractors will need to obtain basic identity details and will check with the Revenue what type of registration the worker holds. The verification may be done by telephone or over the internet. Contractors may assume that the status remains unchanged unless the Revenue notifies them to the contrary.
When contractors deduct tax from payments, they must supply the subcontractors with pay statements. Contractors will no longer be required to submit payment vouchers monthly. Instead, they will be required to submit monthly returns (even for those who make payments quarterly) and must provide details of recipients and payments made, together with a 'status declaration' that none of the payments relate to a contract of employment . This requirement puts the onus of establishing the worker's status on the contractor and there will be penalties for false declarations (and also various other penalties, as now, for both contractors and workers). The returns must be sent in every month, even if no payments have been made, and penalties will apply if a return is not submitted. Nil returns will be able to be made on paper, over the internet or by telephone. It is intended that other online services, such as subcontractor verification checks, will also be available.
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