1. If you hold a tax certificate which does not expire until after 5 April 2007 this will remain paid gross under the new system. If you have certificates which expire before then it will need to be renewed to remain on gross payment under the new scheme. Those with registration cards will be paid net but tax deducted will be 20%.
  2. CIS registration cards, tax certificates and vouchers are being replaced by additional subcontractor information such as a new Unique Taxpayer Reference (UTR) and National Insurance number (NINO) to identify subcontractors.
  3. Subcontractors need to be registered with HMRC, and contractors will need to obtain a verification code for each new subcontractor they engage to determine the subcontractor type and ensure the right deduction rate.  Verifications can be obtained online or by phone.
  4. There are new monthly procedures: a new form of monthly tax returns to HMRC, which can be submitted online although "Nil" returns can be telephoned in.  Contractors must determine the employment status of new subcontractors and make a declaration that no payments within the scheme are made under contracts of employment ie your subcontractor is self employed.  Subcontractors must also be given statements detailing the payments and deductions made each month.
  5. If you are registered for gross payment you will have to be prepared to keep on top of your tax obligations at all times, otherwise your gross payment status could be lost (see below).  No renewal of certificates takes place, but contractors will be subject to compliance review to check whether they remain eligible for gross payment.
  6. Subcontractors will receive information very soon about their registration status under the scheme. However it is essential that both subcontractors and contractors do not take this information as proof of self employed status. It merely advises that if the subcontractor is working in a self employed engagement what his tax status is.
  7. Year-end CIS returns are no longer required.
  8. Standard CIS rate is increasing from 18% to 20% effective from 6th April.
  9. Deadlines for filing monthly returns will be the 19th of the following month.  Payments are also due by the 19th of the following month (or 22nd for online filers, giving three extra days!).
  10. The penalty regime is serious, complicated and costly.  But remember, late and or incorrect monthly returns will be subject to automatic fines and penalties, penalties will even apply for not making a nil return.  Note: HMRC have allowed a grace period, and no penalties will be levied for late returns until 6 months has elapsed after the appointed day. So the first penalties will fall due for late returns that remain outstanding after 6 October 2007.
  11. When a contractor who is also a subcontractor breaches any of the requirements of the scheme he may be liable to reclassification as registered for net payment, and thus suffer tax at 20%. The most serious cases could result in a subcontractor being transferred to “unregistered” status, and thus liable to 30% deduction at source.

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