In the Budget of 2014 the Chancellor announced that the Government would consult on options to improve the operation of the Construction Industry Scheme (CIS) and on the introduction of mandatory on-line CIS filing for contractors.
Following the consultation, the following changes will now come into force from 6 April 2016.
At present, contractors can submit monthly CIS returns by paper or online. From 6 April 2016, the online filing of CIS returns will be compulsory, unless this is not possible due to age, disability of the remoteness of location. The Government expects a small number of taxpayers to have to buy a computer and/or subscribe for internet access.
Check your current system
Please ensure you are able to submit online via HMRC government gateway, you must be registered to use this service or alternatively have a system that can file electronically.
The compliance test for gross payment status
At present, the compliance test for gross payment status covers not only CIS-related matters, but also PAYE and corporate tax compliance and for companies, the Directors’ personal tax compliance.
From 6 April 2016, the test will be simplified, but will still include an obligation to:
- Submit monthly CIS returns on time
- Submit income tax and corporation tax self-assessment returns on time
- Remit all CIS, PAYE and National Insurance contributions on time.
The turnover test for gross payment status
The current turnover test for gross payment status requires businesses to have a construction turnover, excluding VAT and cost of materials, of at least:
- £30,000 each year for a sole trader or company director
- £30,000 for each partner or director in larger businesses, with minimum turnover capped at a ceiling of £200,000 for a whole partnership or company.
From 6 April 2016, the threshold where there are multiple partners or directors will be reduced to £100,000, although the £30,000 limit for sole traders or directors will remain.
All contractors will be expected to submit CIS appeals online rather than in writing.
Online verification of subcontractors
At present, contractors have to verify whether subcontractors can be paid gross or whether a withholding tax has to be made from the payments. This process, known as verification, can be undertaken either by telephone on line. From 6 April 2017, the telephone option will no longer be available, other than for non-routine cases. Some improvements are due to be made to the online verification process following a consultation document.