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Revenue seeks extra £180m in CIS reform

NEWS - Soft touch at first but no sympathy for paying wrong tax

THE TREASURY is looking to reap an extra £180 million a year from contractors when the CIS tax reforms are introduced in April 2007.

The figure is up £30 million on the previous £150 million target as chancellor Gordon Brown eyes the construction sector for extra tax revenue.

HM Revenue & Customs director of compliance Doug Tweddle is the man charged with gathering the extra cash from contractors.

He revealed to Construction News how his army of 300 inspectors and 10,000 admin staff will be policing the industry, which paid a total of £2.7 billion in tax and National Insurance last year.

Mr Tweddle said: 'We have a figure for extra yield of £180 million if people are classified properly under CIS.

'Currently a lot of people are paying the wrong tax and we will have no sympathy for them as we t ighten things up.' The new CIS scheme was due to be introduced next month but was put back a year when the Government realised computer systems and software would not be ready in time to operate it effectively.

Mr Tweddle said the new April 2007 implementation date is now 'set in stone' and his department is working flatout to ensure the system will be ready.

He said: 'We don't want to lose momentum on this just because the date has been delayed a year ? we don't want to be in the same position again.

'Our computer system will be ready by the end of July and we will be inviting the industry to test their software against it before the live date.' The new regime does away with the current bureaucratic process of presenting cards and vouchers in favour of electronic registration.

Mr Tweddle said: 'The current system is an administrative burden and the new one will sweep that away.' HMRC is currently concentrating on ensuring that subcontractors are correctly classified as either directly employed or self-employed.

Revenue officials believe around 5 per cent of subcontractors are wrongly being paid gross of tax and are encouraging them to switch into PAYE.

Mr Tweddle said: 'We need to find people not following the rules because it is unfair at the moment on those who are.'

The Revenue has set up a helpline for enquiries and an online Employment Status Indicator guide, which has come under a hail criticism from contractors.

Mr Tweddle said: 'We want people to talk to us but we aren't getting as many calls as we hoped for on the helpline.

It's running at about 150 a day at the moment. The ESI guide tool is not as easy to use as it should be and we are looking at ways of simplifying it.' He is also promising not to be too heavy-handed from the April 2007 deadline.

Mr Tweddle said: 'We recognise there will be teething problems and will take a light touch in the opening period.

'We won't come down like a ton of bricks on firms but then as it develops we will use the computer system to identify companies not doing things right.

'Before gross payment status is withdrawn companies also get 90 days' notice and can appeal ? it is not in our interests to get things wrong.

'When the new arrangements have settled down an increase in revenue will follow.' The CIS helpline can be contacted on 0845 366 7899.