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At meetings with the Revenue to discuss the new CIS Scheme, it has become clear that the Revenue are planning a new “attack” to target false self-employment in construction.
We know that Ministers have already given the go ahead to double their financial resources to staff better policing and that they intend to double the number of staff currently involved in construction status investigation.
But other changes are coming. Ministers have agreed to deny the set-off of CIS 4 deductions in any case of false self-employment they discover. We are waiting to hear when that will take effect.
The effect of this is best illustrated by an example:
Mr Labour-only has worked for 50 weeks at £500 a week i.e. £25,000 for which CIS 4 deductions at 18% have been stopped i.e. £4,500.
His employer is challenged by the Revenue who argue that PAYE should have been applied. They seek a settlement of
£4,000 Tax
£2,200 Employees NIC
£2,630 Employers NIC
£8,890
At present a set-off is allowed of the CIS 4 tax deducted and a payment to the Revenue by the employer of £8,890 minus £4,500 = £4,390 would be enough to settle the matter.
But if the CIS 4 set-off is denied by the Revenue, the employer would be asked for the full £8,890 and the “employee”, as now, could claim a repayment of £4,500.
The Inland Revenue have also advised that getting the employment status of workers wrong is grounds for removal of Gross Payment Certificates.
We will not know what changes will be made in the April 2004 Budget until the Budget Day – but it is growing increasingly likely that important changes will be made. So please consider the status of your workers now and discuss any changes that would be necessary with your advisors.
AND
Remember your potential liabilities to Class 1 NIC when tendering for work that will be undertaken from April 2004 onwards.
As soon as more is known, we will give the proposals full publicity.