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Contractors divided over tax

MAJOR contractors are calling on the Inland Revenue not to rush through any changes to the Construction Industry Scheme because it would cause too much upheaval.

The Revenue is due to call time tomorrow (Friday) on the consultation document it launched last November, aimed at revamping the CIS tax system.

But major firms are divided over how much the scheme should be changed.

Some have told Construction News that CIS does not need a major overhaul as they have only just managed to get to grips with the system, which was introduced to replace the long-standing 714 and SC60 schemes.

Alastair Kendrick, tax expert at Ernst & Young, said: 'The last change occurred in 1999 and there was a big mess. The feeling is that it is only being sorted out now. Some firms don't want the upheaval of further change.'

He added that contractors were also worried about the Revenue's plans to compel contractors to declare the employment status of their subbies.

Mr Kendrick said: 'There is concern that if they make a mistake, the Revenue will hit them heavily.'

But Construction Confederation tax director Liz Bridge said she welcomed the proposals, particularly the revenue's plans to move away from the paper-based scheme to an electronic alternative.

She said: 'Any change is unlikely to come into force until 2006 anyway. Who in the future wants to be harnessed to plastic cards and a paper-based scheme as we are now?

'Maybe not enough people in the industry have internet connections at the moment but if commercial organisations don't have them in three years they are going to be dead in the water.'

But one major contractor said:

'We're a bit nervous because the revenue does not have a good record with IT systems.'

CIS policy head John Hinton told Construction News last year that more effective use of the technology available would lead to better compliance levels.

The revenue is due to present its proposals for change to paymaster general Dawn Primarolo by the middle of next month.