Proposed changes to CIS abuse rules

The Construction Industry Scheme (CIS) is a set of special rules for tax and National Insurance for those working in the construction industry. It was announced at Spring Budget 2020 that a consultation on measures to tackle abuse of the CIS would be launched.

Following the consultation and further meetings with those working in the sector four new changes to prevent CIS abuse are set to come into effect from 6 April 2021. 

1. CIS set-off amendment power. The measure provides a power to allow HMRC to amend the CIS deduction amounts claimed by sub-contractors on their Real Time Information Employer Payment Summary returns.
2. Cost of materials. The measure makes it clear that it is only where a sub-contractor directly incurs the cost of materials purchased to fulfil a construction contract, that the cost in question is not subject to deduction under the CIS.
3. Deemed contractors. The measure changes the rules for determining which entities operating outside the construction sector need to operate the CIS.
4. CIS registration penalty. The measure expands the scope of the penalty for supplying false information when applying for gross payment status (GPS) or payment under deduction within the CIS.