A special tax deduction scheme for the Construction Industry has existed since 1972 in order to deal with problems, which were endemic in the Industry, of engaging workers on a "cash in hand" basis, coupled with a poor record of complying with tax obligations.  The current Construction Industry Scheme (CIS) has been in place since 1999, but it retains the basic structure of its predecessor, relying on paper vouchers to evidence payments between contractors and subcontractors.

On introduction in 1999, the current CIS suffered from early problems (for example, over voucher supply) and, although it was developed with close involvement of the Industry, concerns continue in the Industry about its processes and the costs to businesses of complying with the rules and requirements.
The Chancellor announced in his Budget 2003 that a new Construction Industry Scheme would be introduced in April 2005.  But in the course of discussions, the industry expressed concern that the April 2005 implementation date would leave it insufficient time to prepare properly for the change.

The Government listened to that concern and decided that, in order to ensure a smooth and orderly transition to the new scheme for both sides, implementation would be deferred until April 2006.  The start date has been further deferred until April 2007.

The Government has set three broad aims that a revised scheme should meet.  They are:

  • To reduce the regulatory burden of the Scheme on construction businesses;
  • To improve the level of compliance by construction businesses with their tax obligations;
  • To help construction businesses to get the employment status of their workers right.

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