New CIS scheme

The construction industry is gearing up for its own version of IR35 when the new Construction Industry Scheme (CIS) comes into force next year.
From next April, a series of checks, registrations and verifications will need to be carried out to determine whether subcontractors are employed or self-employed for tax purposes.
HM Revenue & Customs (HMRC) has issued ten key facts to advise contractors and sub-contractors of their responsibilities.

Ten key facts
1. Cards and certificates will be replaced by a simple verification process.
2. There will be no more annual returns.
3. Vouchers will be replaced by monthly returns.
4. Contractors will need to verify with HMRC that the subcontractor is registered for CIS and how they should be paid. Most existing subcontractors will not need to be verified as nearly all subcontractors, who are already registered with HM Revenue and Customs, will move over to the new scheme.
5. Verification can be done over the telephone.
6. During verification, HMRC will tell the contractor whether to pay a subcontractor gross, net of the standard deduction or net of the higher rate of deduction.
7. Where a subcontractor is not known to HM Revenue & Customs, deductions will be made at a higher rate.
8. Subcontractors starting work in the construction industry on a self-employed basis after 5 April 2007 (or whose temporary registration cards have expired and were not renewed by 5th April) will need to register for the new CIS.
9. If HM Revenue & Customs has no previous record of the subcontractor, the subcontractor may be asked to come in to a local office with two forms of identification to register for the new CIS. This is a one-off process.
10. In the first year, contractors won’t need to verify any subcontractors that they have paid since 6 April 2005, as long as the contractor has seen the subcontractor’s registration card or tax certificate that was valid until at least April 2007.