CIS update

HMRC has published its second booklet in the New CIS Update series; the first booklet is available here.

Under the new scheme which comes into force in April 2007, contractors are required to ‘verify’ subcontractors with HMRC in order to determine whether they should pay them net or gross.

Each month the contractor will then send HMRC a return listing all subcontractor payments made during that month.

HMRC will send out a list to each contractor of subcontractors paid since April 2005 which will determine how the first payments under the new scheme should be made to those subcontractors. These subcontractors do not need to be verified. Subcontractors not listed may need to be verified.

This latest newsletter also carries an article emphasising the importance of establishing correctly the employment status of workers. Contractors will have to sign a declaration each month that none of the persons paid are ‘deemed’ employees. There are heavy penalties for getting this wrong.