KPMG Warns That Contractors May Face Struggle To Renew Tax Certificates

by Robert Lee, Tax-News.com, London

19 August 2002

Contractors working within the Construction Industry Scheme may experience difficulties renewing their CIS5 or CIS6 tax certificates, according to international consultancy firm, KPMG.

The tax certificates allow their holder to receive gross payments. However, in order to qualify, stringent business, turnover, and compliance tests must be passed, meaning that the majority of contractors and subcontractors who apply only qualify for a CIS4 registration card, which does not bestow the same benefits.

Speaking to contractjournal.com last week, Alan Nolan, KPMG Renumeration Group director revealed that in terms of the three tests, 'minor and technical' failures on their own are unlikely to disqualify the contracting business from receiving a tax certificate.

'Under the new scheme, it is now no longer possible to bring tax affairs up to date prior to the date of application. The Inland Revenue needs to be satisfied that the business and those controlling the business can be relied upon to maintain their tax affairs in an orderly manner,' he explained.

However, he added that: 'The main problem is that local inspectors of taxes are split on the interpretation of 'minor and technical'. This can result in a large number of contractors being allocated a CIS4 registration card in one area while a company with similar criteria but a different location is granted a CIS5 or CIS6.'

Mr Nolan told the business journal that firms which feel that they have been unjustly refused a tax certificate should take professional advice with regard to an appeal as soon as possible.

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