A package of measures to improve the new Construction Industry Scheme, was set out by the Chancellor today.
– To reduce costs and streamline the flow of paperwork, the procedures for CIS24 vouchers will be simplified.
– Fewer subcontracting companies will need to make a formal business case to qualify for a CIS5 certificate following the reduction of the turnover threshold from 5 million pounds to 3 million pounds from today
– Two new consultative forums will be established to review the scheme:-
– A Joint Working Group comprising officials from the Inland Revenue, the Department of the Environment, Transport and the Regions (DETR), and representatives from the Construction Industry.
– A User Panel consisting of a cross-section of people from the industry who have hands-on experience of operating the Scheme.
Subcontractors will also benefit from
– The recent announcement of a reduction in the deduction rate from 23% to 18% from 6th April.

– The increase in the PAYE quarterly payments limit announced today which will help the cash flow of many smaller subcontracting businesses.


Streamlining the CIS24 Voucher procedures

When payments are made to a subcontractor who has qualified for a gross payment certificate (CIS6) the subcontractor must complete a voucher – CIS24 – showing the details of the payment. The voucher, which has three parts, is sent to the contractor who completes further information on it before returning the subcontractor’s copy to them.

From 6 May, a subcontractor completing a CIS24 voucher will no longer be required to send their copy of the voucher to the Contractor. The subcontractor will remove their copy of the voucher and retain it for their records. The remaining two parts will be sent to the Contractor as before.

This measure will reduce the amount of paperwork that is currently exchanged between contractors and subcontractors and will reduce the costs of complying with the scheme.

Letters explaining the change will be issued to all contractors and CIS6 holders in mid-April

Reduction in the CIS5 qualifying Turnover Threshold

Under the scheme all subcontractors must have registered with the Inland Revenue to obtain a registration card (CIS4) or certificate (CIS6). Both of these documents need to be presented in person. Some companies who have qualified for a CIS6 may be granted a CIS5 – which does not need to be presented in person – if they are able to fulfil one of a number of criteria. One of the criteria is a gross turnover threshold.

With effect from today the turnover threshold that allows a company, which has qualified for a CIS6, to qualify for a CIS5 has been reduced from 5 million pounds to 3 million pounds. This means that those companies with a turnover of between 3 million pounds and 5 million pounds will no longer need to make a business case to show that they fulfil one of the other criteria in order to qualify for a CIS5.

Where a subcontracting company has been granted a CIS6 and has made an application for a CIS5 that has not been successful, but the gross turnover of the business is in excess of 3 million pounds, they should reapply.

Joint Working Group

The Inland Revenue will be working together with The Department of the Environment, Transport and the Regions (DETR), and all sections of the Construction Industry.

This group will consider ways in which the scheme can be improved whilst continuing to protect the flow of revenue to the Exchequer.

In particular the group will consider:
– The results of independent market research commissioned by the Inland Revenue.
– Similarities between the regulatory requirements of the Inland Revenue and Customs and Excise and how these could be brought together to help businesses.
– The difficulties which CIS6 holders face in complying with their obligations to show their cards in person.
– Ways in which the different criteria for granting a certificate to companies and to individuals and partnerships can be made more acceptable to the industry.
– Introducing in-year repayments for companies.
– Advances in information technology and electronic business and ways in which these could be used to support a streamlining of the scheme.

User Panel

This panel will consist of a cross-section of people from the industry who have hands-on experience of operating the Scheme who will work closely with joint working group. They will identify issues and possible solutions and provide practical advice.

Other measures

The Government announced in a Press Release published on 25th February 2000 that the rate of deduction that will apply to payments under the Construction Industry Scheme is to fall from 23% to18% from 6th April.

This means that subcontractors within the industry without gross payment certificates will have substantially less tax deducted from payments made to them during the 2000-2001 tax year, which they would otherwise have to reclaim from the Inland Revenue.

In addition, the increase in the Quarterly Payments limit will improve cash flow for those subcontracting businesses who have not qualified for a gross payment certificate but who pay employees or subcontractors under deductions of tax. For further details see Budget Note REVBN1A.


A tax deduction scheme for the Construction Industry was introduced in 1971 to tackle the substantial tax leakage in the industry.

The new scheme that took effect from the 1st August was built largely on the principles of the old scheme. Changes to the Scheme were introduced in Schedule 27 Finance Act 1995 and Section 178 Finance Act 1996. Further minor changes were introduced in Schedule 8 of Finance Act 1998.

Changes were necessary because the rules that governed the entitlement of 714 certificates – which allowed subcontractors to be paid gross – proved increasingly ineffective in limiting the numbers of certificates in circulation.

The widespread availability of certificates encouraged misuse of the documents and tax evasion continued at an unacceptable level. The loss to the Exchequer is believed to be well above 100m pounds per annum.

Under the new scheme, all subcontractors must register with the Inland Revenue and present their documents to the contractor before they can receive payment for work they have done. Vouchers need to be completed (either by the contractor or subcontractor) for all the payments that are made under the scheme. These are ultimately sent to the Revenue to facilitate compliance checks.

The majority of subcontractors have been given a CIS4 registration card, which requires them to be paid after deductions on account of tax and class 4 National Insurance Contributions. The card carries a photograph of the card holder and must be presented in person.

The CIS6 certificate is issued to those subcontractors who pass the statutory tests and allows them to receive payment gross. It is the normal gross payment certificate available to those working within the industry. It carries a photograph of the certificate holder and must be presented in person.

The CIS5 certificate is issued only to companies that can make a business case – there are published rules – or have a turnover in excess of the set limit – this has today been reduced from 5 to 3 million pounds. This certificate does not carry a photograph and need not be presented in person.

The scheme is already proving effective: to date at least 50,000 businesses have registered with the Inland Revenue of whom they were previously unaware.

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