Contractors within the construction industry are required to operate the Construction Industry Tax Deduction Scheme, which provides for deductions to be made from payments to certain subcontractors.
The subcontractor scheme, now known as the Construction Industry Scheme (CIS), was introduced originally in 1971. Major revisions were announced in 1975, 1993 and again in 2005. Subsequently, the number of subcontractors increased sharply and a number of measures were introduced in an attempt to improve compliance within the industry.
In 1997 the Revenue and Contributions Agency (CA) announced a range of measures tightening the PAYE compliance rules for construction industry workers (Revenue and CA joint press release, 25 September 1997) and issued a new leaflet entitled Workers in building and construction: help with tax for employees and the self-employed.
From 6 April 1998, the agency tax rules were changed to remove the exemption for construction workers and agencies have since normally been obliged to deduct tax and NIC under PAYE.
The Revenue and CA increased the number of visits to construction firms to check the status of workers and that PAYE was being operated where appropriate. Where it was found that firms were not following the correct procedures, arrears of tax and NIC were sought back to at least 6 April 1997. Interest and penalties also applied, where appropriate.
A revised scheme took effect from 1 August 1999, intended to reduce costs and strengthen safeguards against tax evasion. The changes involved the restriction of exemption certificates (by the use of stricter tests for qualification) and the introduction of mandatory registration cards.
Further revisions to the CIS took effect from April 2007, including scrapping subcontractor registration cards in favour of a registration system operated by HMRC.