The following Tax practice note provides comprehensive and up to date legal information covering:
FORTHCOMING CHANGE relating to construction industry scheme (CIS) abuse: Following a consultation that ran until 28 August 2020, Finance Bill 2021 (FB 2021) will include measures to tackle abuse of the construction industry scheme (CIS). FB 2021 will contain four amendments to the CIS rules: a simplification of the rules for deemed contractors, changes to the rules on deductions for materials, a new power for HMRC to restrict CIS set-off claims and an expansion of the scope of penalties. The measures will apply from 6 April 2021. For more detail, see: Tackling Construction industry scheme abuse and News Analyses: Further provisions for draft Finance Bill 2021—Tax analysis—Real estate and Consultation on tackling Construction Industry Scheme abuse.
This Practice Note details the obligations imposed by the construction industry scheme (CIS) rules on contractors, covering the requirement to:
register as a contractor
verify the employment status and CIS payment status of its sub-contractors
where relevant, deduct tax from payments made to sub-contractors
pay the withheld tax and submit CIS returns to HMRC on a monthly basis, and
preserve tax records
The CIS was devised to limit the amount of tax lost as a result of sub-contractors in the construction industry under-declaring or failing to notify their chargeability to UK tax.
For an overview of how the CIS works, see Practice Note: Construction industry scheme—overview.
The scheme operates to withhold tax
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