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Guidance on CIS changes needed now, says ICAEW

8 January 2021: HMRC needs to publish draft regulations and guidance detailing forthcoming changes to the construction industry scheme or consider pushing back implementation until 2022, according to ICAEW.

In responding to the latest HMRC consultation on draft primary legislation amending the construction industry scheme (CIS), ICAEW’s Tax Faculty has urged the government to move quickly to give businesses enough time to prepare.

The changes, which aim to tackle abuse of the CIS, are due to take effect from April 2021, but HMRC is yet to publish secondary legislation, guidance or the IT specifications needed for industry to make necessary changes.

The faculty argues: “As there are now only three months until the implementation date, consideration should be given to deferring commencement until April 2022.”

Published as ICAEW Rep 05/21, the response also reiterates ICAEW’s concern about plans to remove firms’ ability to take account of the cost of materials when paying down the chain (see ICAEW Rep 57/20).

The faculty warns that this change may result in businesses having insufficient cash to pay sub-contractors amounts that they are owed.

The response also describes the requirement for businesses to have a rolling daily 12-month look back test, with compliance required the day after the CIS threshold is exceeded, as “extremely onerous” and “excessive”.

ICAEW urges HMRC to consider a less frequent review requirement, for example, six monthly, and suggests that businesses have a period of three months after reaching the threshold to start operating the CIS.