Tax regs can put building firms out of business

Robert James Partnership, the chartered certified accountancy firm, warns that 80 per cent of building contractors are not complying with the Government's stringent new tax laws.

Robert James Partnership, the chartered certified accountancy firm, warns that 80 per cent of building contractors are not complying with the Government's stringent new tax laws.

The vast majority of building firms in the South East are failing to deal with the Construction Industry Scheme Regulations that were introduced in April of this year.

According to the award winning tax team at Robert James Partnership, 80 of the 100 firms they have surveyed are not making accurate provision for the CIS regulations and 40 per cent believe that the new rules threaten their businesses.

The new rules do not come into effect until April 6 2007 but their impact is already relevant as compliance will be checked over the previous 12 months.

Lesley Stalker, Tax Partner at Robert James Partnership, said: "The vast majority of companies are not yet addressing the changes to CIS and how they will deal with them".

""Next April may seem to be in the distant future but they will be caught out if they do not adhere to these new regulations, starting now".

In light of the new regulations, it is now more important than ever that the contractual relationship between the contractor and sub-contractor is accurately documented".

"The companies surveyed by Robert James Partnership were unaware of the introduction of a defined list of compliance failure and that if a failure is incurred now it could have a huge impact upon the CIS status of the firm".

"Lesley Stalker explained: "There is industry wide outrage at the challenge to sub-contractor status, whilst at the same time denial of its relevance and ignorance of the potential impact on business".

""These companies have taken the view that the status issue is not relevant if the subcontractor works for other companies and a general lack of understanding of the relevant issues that can affect the status position".

The contractors that were surveyed stated that they were struggling with the new rules; subcontractors were refusing to be taken onto contractor's books as employees, and are instead looking for other companies that will still treat them as self-employed.

The cost of employing the subcontractors is considered to be prohibitive by nearly all the businesses surveyed and they also stated that there was a real threat of the additional costs putting them out of business".

""Firms seem to think that they are not going to have a run in with the Inland Revenue as they have been very amenable on previous visits but the regime has had a completed shake up, and I think that they will find it all very different today," explained Lesley Stalker.

The new CIS regulations that were published in April represent the biggest and most important changes for the construction industry since the original scheme was introduced by the Inland Revenue in the mid 1970s.

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