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.