This means subcontractors 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.
The new rate, announced today by the Paymaster General, Dawn Primarolo will apply to all relevant payments from 6 April 2000.
The Minister has also told industry representatives that she is taking very seriously the representations that they have made to her and the Inland Revenue about the administrative burden that they believe the new scheme imposes upon them.
She has asked the Inland Revenue to consider realistic ways of addressing these concerns.
The rate is a flat rate, which is applied to the net payment after the deduction of materials. The flat rate therefore needs to take account of personal allowances and the lower rate band.
There are currently over 500,000 subcontracting businesses working within the industry that will be paid after deduction of tax and most will reclaim a repayment of tax as soon as their liability for the year is exceeded by the deductions made.
According to the Revenue, the reduced rate of 18% will be closer to the final liability that subcontractors are due to pay and will therefore allow them to keep more of the payments made to them throughout the year.
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