Following the announcement that the government will implement a series of changes to the Construction Industry Scheme (CIS), you can expect the second wave of changes on 6th April 2016. As as a tradesperson, it’s important you understand the planned changes and how they will impact you.
Why the Change?
The idea behind the changes to the Construction Industry Scheme was to reduce administration, and in turn to relieve a little of the cost burden on construction businesses. Following the changes it is believed more subcontracting businesses will be able to retain gross payment status, resulting in improved cashflow.
First Wave of Changes
Implemented 6th April 2015
Last year a number of changes were implemented as part of the first wave. The need to make a monthly return to the HMRC, even when the contractor has not made any payments in a tax month, is now no longer required, saving unnecessary paperwork. Contractors can still make a voluntary nil return, however they won’t be legally required to do so.
Joint ventures, where one member already has gross payment status, is great news for the other member who no longer has to share the same status. As long as the partner with the status holds at least a 50% portion of shares in the company or has a right to at least 50% of the assets or income.
In cases of insolvency proceedings, earlier repayments can be made to liquidators. Prior to the changes being implemented, repayments had to wait until after the end of the tax year. However now if the amount is deemed excessive, a repayment can be made earlier, during the tax year.
Second Wave of Changes
Implemented 6th April 2016
This year sees a number of further changes, including the threshold for the turnover test being reduced to £100,000 in a situation where there is a multiple directorship.
To further reduce the impact of administration on construction companies, directors’ self assessment filing requirements will no longer be required as part of both the initial and annual compliance tests.
Online filing of CIS returns, from the 6th April this year, will be mandatory. Those unable to access an online form, for example due to their age or disability, will be offered support to make alternative arrangements.
Third Wave of Changes
Implemented 6th April 2017
In April next year it will be mandatory for all subcontractors to be verified online. Currently if a contractor was paying a subcontractor they wouldn’t have to verify the subcontractor if they had included them on a monthly return in that tax year or the two years prior. However next year it will be mandatory to register all subcontractors.
You can find out more details about the changes to the CIS here.
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