Proposed postponement of CIS changes until 2007

Scottish Building assess the news that the proposed changes to the Construction Industry Scheme (CIS) have been postponed until April 2007.

By now the industry will be buzzing with the news that the proposed changes to the Construction Industry Scheme (CIS) have been postponed until April 2007.

This is a positive development and provides many within the industry with comfort that there is now time to discuss in more detail with Her Majesty's Revenue and Customs (HMRC), the many idiosyncrasies that occur when operating the CIS as a contractor or sub-contractor, and the solutions to these sometimes small but always important issues.

It will also provide an opportunity for software developers to ensure their product is compliant with the requirements of the new scheme, as well as allowing time for the product to be checked for bugs, or at least as far as software ever can be.

There is no doubt at all that the delay in implementation is a necessary and good thing.

However, there are two points which I feel contractors need to bear in mind, particularly during this unexpected period of grace prior to the implementation of the new scheme in 2007.

Firstly, do not lose the impetus that has built up within the industry, believing it was preparing itself for change in 2006.

Granted preparations can now be considered and delivered at a slower pace, but slipping out of fifth gear and into first is not a realistic option, and god forbid we stall altogether.

The work which has been done to date must be continued.

Ensure you are up to date with developments regarding the revised CIS and ensure your IT is compliant.

If you are scratching your head and asking 'What IT?', use this period of grace to acquire some and undertake some basic training to ensure you get the best from your investment.

It is only human to procrastinate - after all 2007 is such along way ahead isn't it? Well actually, no it isn't - although the scheme is not changing fundamentally the procedures and processes within it are changing radically, and for the better.

With all things being equal and assuming that HMRC systems and technology can cut the mustard, there are many aspects of the revised scheme which will be positive for the industry.

However, you must continue preparing for the implementation.

Ensure that your staff attend as many training courses as they can, obtain the latest updates and keep abreast of developments, decide who within the company will be responsible for doing what in terms of the new responsibilities and requirements.

The more work you put in now, the more likely your transition to the reviewed scheme will be as smooth as possible.

Secondly and more importantly, do not believe that because the implementation of the revised scheme has been postponed, that the issue of employment status has similarly been postponed.

HMRC are as interested in this issue now as they have always been.

The correct clarification of employment status has always been a part of the CIS process.

In fact the consideration of a labour only sub contractors' (LOSC) status should be the first action on a contractor long before they consider implementing the CIS in terms of payments etc.

- and to all extents and purposes this will remain.

HMRC have distributed two waves of letters to contractors and LOSC's on this very subject, and I know from speaking to many companies within the industry that HMRC visits abound on this very issue.

So if you do one thing today, consider the status of your LOSCs.

Look at all the factors which differentiate between a genuine self-employed entity and an employee.

Be objective, and above all, be honest with yourself, and should the result of your considerations be that your LOSCs are more likely to be employees than self-employed, don't panic! Speak to your Federation or advisors and assemble a plan of action.

Begin negotiations to bring your employees, for that would be what they are, books in or radically alter the way the relationship between you and your LOSCs operates to ensure they are fulfilling all the requirements of a self-employed entity.

Whatever you do, do not do nothing.

Employment status although not the most straightforward issue, is not nearly as complicated as some would have you believe - where there is panic there is money to be made by some! Scottish Building take the much more altruistic view that where there is panic there are companies within our industry requiring assistance.

By addressing the issue of employment status now you will be both ensuring you are compliant with the CIS requirements as of today and preparing the ground for the implementation of the revised scheme in 2007.

If you are unsure what the main issues in determining employment status are then ask.

And bear in mind employment status is not a choice, but is a result of the reality of how a relationship operates.

The more contractors who seriously consider their position and take appropriate action, the less likely the LOSCs are to have an abundance of choice as to where they work next, should you begin negotiations with them with regards to coming books in.

We have an extra year to get ready for the revised system, please use some of this time to consider the risks you are facing today!.

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