The new Construction Industry Scheme (CIS) for contractors employing subcontractors in the construction industry is due to come into effect on 6 April 2007. Under the new scheme, it will be necessary for contractors to obtain confirmation from HM Revenue and Customs as to whether a subcontractor is to be paid gross or after deduction of basic-rate tax. This will need to be done before the first payment is made. Subcontractors who are paid after deduction of tax will have to be given a statement showing the tax deducted and the net amount paid. The new scheme will require the submission of a declaration by the contractor, which will accompany the monthly return, that none of the subcontractors has been employed under a contract of employment.
If you are in any doubt about the status of a subcontractor, first look at the HM Revenue and Customs employment status tool, which may assist in deciding the correct employment status.
For further information on the operation of the new CIS, see the HMRC website.
