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CIS Scheme Changes (Construction Industry Scheme)

The government updated the CIS scheme - (Construction Industry Scheme) for contractors and subcontractors in the construction industry for payments made on or after 6 April 2007 and as a result construction industry subcontractors and contractors have a different set of rules that have needed to be complied with since that date and the rules have changed again on the 19th of April 2016.

So what was the old scheme and how has it changed?

The old CIS (Construction Industry Scheme) requirements before 6 April 2007

Previously with the CIS scheme contractors and subcontractors in the construction industry there were 3 main documents (the CIS4 card, CIS5 or CIS6 certificate) used by the industry to prove that contractors and subcontractors were registered with HMRC and also to make sure that the correct Industry Scheme was applied to a subcontractor's labour.

CIS4 Card - When registered with this document the subcontractor billed the main contractor but the contractor then only paid the subcontractor 82% of the labour cost of the bill. The remainingg 18% was retained by the contractor for paying across to HMRC on behalf of the subcontractor. This was paid using paper based returns on a monthly basis (CIS23, CIS24 and CIS25) and an annual return (CIS36).

The subcontractor could then offset any payments made this way to HMRC against the final tax bill at the end of the tax year. The CIS4 card was largely for subcontractors that HMRC were not certain would meet their tax bill, for exanple, new businesses with no or little trading history.

Ayone registered with the CIS5 / CIS6 certificate was basically one step up from those registered with the CIS4 card in the eyes of the Revenue! They allowed contractors registered with this certificate to pay their subbie's labour bill in full and for the subbie to then deal with the annual tax in the usual way.

What changed with the introduction of the NEW CIS (Construction Industry Scheme) on 6th April 2007?

Increase in the standard rate of tax deduction (for payments) from 18% to 20%.

The old Vouchers, Tax Certificates and registration certificates have been replaced with a UTR (Unique Tax payer Reference Number) that is verified via internet submissions to HMRC.

The annual return has been scrapped - Only monthly returns now required from contractors to be submitted via internet submissions to HMRC for payments made on or after 6 April 2007.

Contractors are also now required to issue all subcontractors with Payment Statement reports monthly.

CIS Scheme Changes 2016 and 2017

CIS 2016 Changes from 19th April 2016:
- Changes to eligibility of individuals and businesses to join the CIS scheme
- CIS returns must now be filed online
- Errors must be corrected and re-submitted online
- New online appeals process
- Nil CIS returns are no longer mandatory (over 50% of submissions submitted via Sage are NIL)

From April 2017, the UK government have announced further changes including the compulsory online verification of sub-contractors, this is a big change.

CIS Scheme Changes and Sage CIS Software - The Solution!

OK, now you know how the CIS scheme changed in 2007 and again in 2016 or if you are new to the construction industry that it exists don't panic! - Sage, the UK's favourite accounting software provider have a new Sage 50 CIS module to plug into the Sage 50 Accounts 2018 software range that is available on a subscription basis for £10 a month.

The old CIS module developed years ago is no longer compliant so all current users will need to upgrade the module to remain compliant.

The new Sage 50 CIS Module makes handling invoices and payments to subcontractors quick and easy. It is fully compliant with the latest legislation changes and CIS returns can be submitted online to HMRC in just a few clicks. It is also simple to correct any errors and re-submit.

Ready to buy or want some help first or more info? Contact us today.

Sage Accredited Accountant Partner


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