Delayed construction scheme faces contractor data crunch

The new scheme revamps the way main contractors deal with subcontractors. Details of subcontractor lists will be sent to contractors.

Although the accounting, construction and IT industries welcomed HMRC’s decision to delay the introduction of the scheme for 12 months, there are fears that the technical problems could still bring the scheme grinding to a halt, causing incorrect tax payments and increased administration when it finally comes into effect on 6 April next year.

HMRC will provide transitional documents to main contractors in November so they can record the subcontractors they have employed over the past two years.

But the construction industry is worried that if any subcontractor details are left off the documents, then thousands of contractors will swamp HMRC phone lines in the first weeks of the scheme.

Unable to get through to HMRC’s advisers, some main contractors may use their own judgement about how to deal with their subcontractors’ tax affairs.

‘Because it hasn’t been publicly trialled, who knows whether the phone system will be up to the job?’ asked Liz Bridge, head of tax and pensions at the Construction Confederation. ‘It all stands on whether the transitional lists are complete. We haven’t seen any of them yet. Some are due in November, and when we’ve seen them we’ll know how good they are.’

If the details on the transitional lists are correct, then main contractors will not have to contact HMRC when the scheme comes into effect.

Any queries will initially go through HMRC call centres until the IT systems are bedded down two weeks later.

‘If everyone’s on the lists, then confidence will soar,’ Bridge said. ‘If they’re only 50%-populated it will create verifications for contractors and their accounting staff to check with HMRC.’