Subcontractor companies not holding a tax exemption certificate receive payment net of 18% (‘CIS’) tax. Until 5 April 2002, the CIS deductions could only be set against the company’s corporation tax liabilities. Since 6 April 2002, CIS deductions should have been set against PAYE, NIC and CIS liabilities of the company in priority to corporation tax. The effect of this change is to improve cash flow because PAYE, NIC and CIS payments are made during the year as opposed to corporation tax that is generally paid nine months after the end of the accounting period.
Regulations came into force last September allowing the Inland Revenue to renew subcontractors’ temporary registration cards (CIS4(T)) for a period of 12 rather than three months. In exceptional cases, this may be further extended to three years.
The new regulations also recognise that some individuals needing a CIS6 gross payment certificate may not have an NI number. This could be for example because they are subject to social security rules abroad whilst working in the UK. They may now be given a ‘substitute identifying number’ instead. This is likely to make the task of inspecting certificates for validity harder still!
Note also that the government is seeking views on a number of proposals to reform the Construction Industry Scheme. Watch this space.