UK Construction Industry Unprepared For New Tax Regime

by Robert Lee, Tax-News.com, London

15 February 2007

The United Kingdom construction industry is 'alarmingly unprepared' for the introduction of radical revisions to the industry's tax system, due to come into force in April, according to KPMG.

The new scheme, known as the 'Construction Industry Scheme' (CIS) governs the way in which sub-contractors are paid. But KPMG's survey of 465 construction industry professionals shows that with less than four months to go, the industry is far from ready for the new scheme, and is concerned about how it will operate. This is despite the reform being postponed from its initial planned implementation date of April 2006.

The survey found that almost seven out of ten respondents had concerns about operating the new scheme, and nearly 60% said the new scheme would be harder than the old scheme for their business to operate. Over half said their staff were not adequately trained with regard to the new scheme, and just 5% had prepared a training manual. Less than 10% had sent information to their subcontractors to inform them of the changes.

“Our survey confirms what we have heard time and time again anecdotally – that the industry is not ready for the changes and is worried about how to cope," observed Alan Nolan, Director of KPMG’s employment tax in construction group.

"Despite postponing the scheme’s introduction for a year, HMRC has been slow to issue key documents about how it will operate and some construction firms have been too slow to take action. The industry needs to wake up as these changes are just around the corner and if their systems are not set up to manage them, they will run into major problems," warned Nolan.

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