Changes to CIS rules from 6 April

Changes to tackle Construction Industry abuse were proposed by HMRC in November 2020 and are set to become law with effect from 6 April. The legislation will affect those who work in construction, who operate within the Construction Industry Scheme (CIS), or who represent construction businesses. There are four changes to the CIS rules:

CIS set-off amendment power

This will allow HMRC to amend the CIS deduction amounts claimed by sub-contractors on their Real Time Information (RTI) Employer Payment Summary (EPS) returns. This power will be used to correct errors or omissions relating to the claims, to remove claims, and to prevent certain employers from making further similar claims, where employers do not provide evidence of eligibility and/or evidence of the sums deducted, and do not correct their EPS at HMRC’s request.

Cost of materials

The change clarifies that it is only where a sub-contractor directly incurs the cost of materials purchased to fulfil a construction contract that the cost in question is not subject to deduction under the CIS.

Deemed contractors

There are changes to the rules for determining which entities operating outside the construction sector need to operate, the CIS (‘deemed contractors’). Rather than looking back at each year-end to determine the level of construction expenditure these businesses will need to monitor that expenditure more regularly and apply the CIS when construction expenditure exceeds £3 million within the previous 12 months.

CIS registration penalty

This change expands the scope of the penalty for supplying false information when applying for gross payment status (GPS) or payment under deduction within the CIS. Individuals and companies will now be liable to a penalty if they are in a position to exercise influence or control over the person making the application, and either encourages that person to make a false statement or supply a false document in support of that application; or where they themselves make a false statement or supply a false document for the purpose of enabling another person to register for GPS or payment under deduction. For further information, visit the government website. If you have any questions about this or how it will impact you, please get in touch.