Familiarise yourself with tax changes, ACCA tells the building industry

The UK's building and construction industry is burying its head in the sand when it comes to the soon-to-be introduced Construction Industry Scheme (CIS), says ACCA (the Association of Chartered Certified Accountants).

April 2007 will see the introduction of the new scheme, and ACCA has learned that the majority of letters from HMRC to the construction industry to ensure they understand and meet their obligations to apply the correct employment status to their workers have had a poor response. As a result, ACCA is calling for the industry to respond to any correspondence from HMRC and to clarify their correct employment status to their workers - or risk financial penalties.

Bob Cope, spokesperson for ACCA, said: "With these letters, HMRC has attempted to engage those businesses where they believe there are questions of employment status of subcontractors. However, the response from within the construction industry sector to date has been very slow, indicating a classic head-in-the-sand approach which could be costly for them. Should the subcontractor be identified as employee, then the tax and National Insurance Contributions will be payable."

HMRC are helping contractors and subcontractors get the status right by launching the Employment Status Tool on their web site which will enable contractors to confirm the status by responding to a number of questions. Alternatively, HMRC's Booklet IR56 will provide outline guidance on employment status.

Bob Cope concluded: "Even if you believe there are no employment status issues with your subcontractors - or subbies - remember the new scheme requires you to change both admin and IT systems to support it, together with the requirement to complete a monthly return detailing payments made to all subbies and to confirm that the employment status of all subbies returned has been verified; failure to do so could result in significant penalties.

"The need to engage with HMRC is an imperative because if the industry does not get employment status right it will cost money. Where status has been incorrectly identified, this could result in the imposition of penalties and the associated employment taxes going back six years."

ACCA is also recommending that the industry familiarises itself with the HMRC's leaflet New CIS: An Introduction to the Changes." The new, updated guidance leaflet is available from the HMRC web site: http://www.hmrc.gov.uk/