HM Revenue & Customs (HMRC) has launched a public consultation into planned changes to the rules to prevent tax loss from the operation of the Construction Industry Scheme (CIS).

The consultation document is available at GOV.UK and is open for comments until 28 May 2020.

While the Government recognises that the majority of businesses in the construction sector meet their CIS obligations in full and on time, it notes that a minority of businesses are abusing the rules to extract cash from the tax system and to falsely reduce their tax liabilities.

In the March 2020 Budget, Chancellor Rishi Sunak announced that, from April 2021, HMRC will be able to correct the amount of CIS deductions claimed on a sub-contractor employer’s return where it identifies or suspects inaccurate amounts have been claimed.

Other changes include clarifying the law regarding the CIS rules on “materials deductions” and “deemed contractors”.

In the longer term, the Government is considering introducing measures to improve the information available to HMRC about construction supply chains and to encourage contractors to undertake supply chain due diligence to support CIS compliance by all parties within the chain.

This consultation sets out these changes and seeks input in three areas:

  • on the measure designed to ensure CIS deductions claimed by employers are permitted only where there is satisfactory evidence to support them, particularly on the implementation of the proposed provision)

  • other ideas, or rules within the CIS that could be clarified, to minimise misinterpretation and abuse

  • feedback on the supply chain measures which are at an early stage of development.

Last reviewed 25 March 2020