Changes to the Construction Industry Scheme (CIS) 2020

Changes to the Construction Industry Scheme (CIS) are directed towards tacking abuse, and take effect from 6 April 2021. They include:

- Cost of materials - there will be more specific rules about what type of expenditure on materials can be deducted before calculating tax. This is to tackle inflated materials costs leading to lower deductions of tax.

- Deemed contractors - aimed at businesses outside the construction industry, but whom might incur substantial construction costs (over £3m). This introduces a requirement to review expenditure on a 12 month rolling basis, and register rather than at the end of each accounting year.

- Increased penalties for supplying false information to achieve Gross Payment Status.

- HMRC will gain the power to amend CIS deductions claimed by sub-contractors on monthly PAYE returns and reverse CIS claims accordingly. This could lead to enforcement proceedings, interest and penalties at much earlier stages in the cycle.

My take on this is that with an increased compliance burden, the value of Gross Payment Certificates are heightened, and as such, construction businesses must ensure that their HMRC compliance history remains unblemished in spite of current pressures on cash..