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Revenue 'in denial' over CIS

Confederation chairman and software developers highlight unrealistic timetable for Construction Industry Scheme

THE CHAIRMAN of the Construction Confederation has accused officials of being in denial over potential industry chaos following the Revenue's decision to press on with the introduction of the electronic Construction Industry Scheme next April.

Peter Commins is seeking an urgent meeting with chancellor Gordon Brown to discuss the industry's fears.

He wrote to Mr Brown: 'For some considerable time now we have been warning your officials that the proposed start date was unrealistic, because the necessary software to run the scheme was not ready in time.

Your officials continue to be in denial about this.' HM Revenue & Customs is due to meet the industry working group Cirip to discuss the Construction Industry Scheme on August 25.

Dennis Keeling, chief executive of the British Application Software Developers Association, said: 'The trouble is that the Revenue still hasn't given us the final specifications for the software yet and we usually need between six and nine months to get it ready. We might just meet the deadline but then you've got to roll it out.

'They have got to develop a system for this which will interact with their two other computer systems, which they still haven't done yet.' But in a letter to Cirip, Revenue compliance officer Doug Tweddle ? who describes himself as 'a newcomer to the CIS scene' ? said 20 software products would be available in time for the launch.

He added that the Revenue was also addressing industry concerns over technology, such as its inability to handle multiple trading names.

Mr Tweddle ruled out a time extension to the current CIS scheme because it would require legislation, which could not take effect until the next Finance Bill in 2007.

And he added that any delays to the new scheme '?would mean we would be denied the discipline of contractors completing declarations, with the potential penalties, arising from the reform changes'.

Under the new CIS, contractors must complete a tax status declaration with each monthly return.

Faye Doshi, policy officer at the National Specialist Contractors' Council, said: 'The worst-case scenario will be if our members get penalised for errors by the Revenue.

One senior industry source said: 'At first the Revenue was happy to work with us on this but there has been a hardening. The Treasury has gained at least £30 million by getting firms on to PAYE and it can see a lot more revenue as soon as this comes in.'

Revenue concessions on tax changes

ALTHOUGH it is sticking to the April 2006 introduction, HM Revenue & Customs has made four concessions.

It will defer the introduction of automatic penalties for late CIS returns and payments for six months ? although they will still count against a taxpayer's record.

Contractors will also be allowed to make three late CIS returns or payments instead of two over a 12 month period without jeopardising the taxpayer's compliance record.

The Revenue has also promised to extensively test the tax treatment qualification test using real data before beginning rolling compliance tests on the industry.

The TTQT will assess whether contractors are eligible for beneficial gross tax treatment. The British Application Software Developers Association fears that when the scheme is introduced, thousands of firms could fail the test ? even a misspelt trading name could lead to 'unrecognised' status and a higher tax bill.

The Revenue has added that it will notify contractors with subcontractor details before the launch to help them check that their records are correct.