好色先生TV

The new tax system for the construction industry has been recognised by most contractors and subcontractors in advance of the deadline implementation date of 1 August 1999. However, as with other pieces of construction-specific legislation 鈥� most notably the Construction (Design and Management) Regulations 1994 鈥� the parliamentary draftsman seems to have aimed the penalties for non-compliance at the employer (as well as the other participants) in order to drive down the rules from above. Those employers that do not brief their contractors and check their new documentation should beware: they will be in for a nasty shock when they return from their summer holidays.

What is the new Construction Industry Scheme? In a nutshell, it is the replacement of the old construction industry tax-deduction scheme, under which large numbers of subcontractors were exempted from tax deduction and were able to be paid gross, rather than net, if they held 714 certificates.

The new scheme introduces more stringent tests, new certificates, and, in default of certificates, registration cards for subcontractors. (Poor tax compliance may lead to the non-issue of a CIS certificate, so firms should concentrate on acquiring a squeaky clean reputation from now until August. The law requires a good tax-compliance history for three years, although it acknowledges that minor and technical errors will not count towards the refusal of a certificate (see 好色先生TV, 25 September 1998.) Most significantly for employers, the CIS expands the definition of those who are deemed to be 鈥渃ontractors鈥� under the scheme, and renders many employers liable to penalties if there is non-compliance.

The category of employers that can be deemed to be contractors has been extended to include public offices or departments and statutory bodies. In construction contracts, there is usually a provision that makes clear whether or not the employer is deemed to be a contractor for the purposes of tax. In the JCT Standard Form of 好色先生TV Contract 1998 (Private with Quantities), for example, the fourth recital, the appendix, and clause 31 deal with the status of the employer and whether or not it is treated as a contractor under the relevant taxes act and regulations.

Furthermore, the financial threshold for being deemed a contractor increases under the new scheme to an annual expenditure on construction operations for each of the previous three years of 拢1m (or, if in one year of the three that threshold is not reached, an average expenditure over the three years of 拢1m per year).

As a consequence, it is likely that any employer engaging in significant construction work must complete the appendix to the JCT Contract denoting that it is a contractor for purposes of tax. And the employer will need to operate the scheme by checking that the 鈥渞eal鈥� contractor holds a valid certificate, so that payment may be made gross, or if the contractor holds a valid registration card, payment should be made net.

If the employer makes a gross payment to a contractor with no certificate it may be liable to a 拢3000 fine

The registration card is issued to those contractors who fail to meet the tests required for the issue of a certificate.

The employer will not be able to pay a contractor if it does not carry a certificate or a registration card, unless that contractor is treated as an employee (with associated PAYE, National Insurance contributions and employee rights responsibilities).

What happens if the employer fails to comply with the new scheme? The consequences could be damaging. If the employer makes a gross payment to a contractor with no certificate, then that employer is, arguably, negligent and subject to a penalty of 拢3000.

In conclusion, employers must pay careful attention to the rules in the CIS. They must call for evidence of certificates or registration cards from their contractors and they must very clearly advise all their contractors (and their accounts departments) that, if these documents are not in place by 1 August this year, no payments will be made.