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01-May-2007

 

Firms face new ways of dealing with sub-contractors

 

The construction industry, as well as being affected by recurring economic conditions, has been subject to an increasing number of legislative changes affecting both contracts and disputes in recent years. There has been a significant upheaval in the law affecting standard forms of contracts and consultants' terms of engagement and a practically unprecedented legislative intervention in commercial contracts. At the same time, legislation has brought significant changes to the way in which the sector resolves disputes.

 

One of the main changes is the new Construction Industry Scheme (CIS) rules, which came into force earlier this month affecting more than 250,000 contractors and outlines their duty to ensure that they comply fully with these regulations or face the possibility of large penalties.

 

Contractors across the UK need to ensure that information they hold on their sub-contractors is correct or face fines of up to £3,000 if they fail to submit accurate and timely returns to HM Revenue & Customs (HMRC) or provide monthly Sub-contractor Payment & Deduction Statements. The changes are all part of the Government’s move towards electronic transactions and to address the issue of counterfeit cards and certificates, bringing three government databases together to provide single records for each CIS contractor and sub-contractor.

 

It applies to everyone who is a contractor and/or subcontractor in the construction industry which can include limited companies, partnerships, trusts and self-employed individuals. It does not apply to employees.

 

What are the pros and cons of the new CIS?

 

Contractors have to know the employment status of the workers they engage. The planned support from the Inland Revenue by telephone, post or through an online interactive tool is designed to assist Contractors with this task. A Contractor will no longer have to request documents from a Sub-contractor to establish whether payment should be net of CIS tax or gross as the Contractor will contact the Inland Revenue with basic details about the Sub-contractor and will be provided with this information direct.
 
On the down side, Contractors will have to make a monthly return whether or not payments have been made to any Sub-contractor in that month. If necessary, nil returns must be filed. Larger Contractors will be required to pay CIS tax electronically, with similar penalties being imposed as apply to a failure to pay PAYE.

 

 Levi Solicitors in conjunction with HW Chartered Accountants and Leeds Chamber of Commerce are undertaking client seminars to educate contractors and subcontractors about the changes ahead. If you would like to attend the next seminar on Thursday 17 May contact Sinead Sopala on 0113 297 3198 or email ssopala@levisolicitors.co.uk to book your place at our free seminar.

 

ENDS

 

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Tel: 0113 297 3198   | Email:

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