Proposals for transitional arrangements to the Construction Industry Scheme went to Primarolo on Wednesday and were set to be confirmed yesterday.
The Inland Revenue would not give further details but it is understood that the government is to allow firms to opt-out for up to three months. This means that the scheme will come into effect as planned from 1 August, but firms are expected to be given the choice of continuing with the industry's present tax arrangement until November if they are not ready for the changeover.
As Building revealed last week (9 July, page 9) the Revenue has been forced to draw up the measures because tens of thousands of specialist contractors are not prepared for the changeover.
This is either because they have not applied for new tax certificates or because they applied in good time and the paperwork has not been processed by the Revenue.
Emergency talks over the introduction of the scheme started last week after the Construction Confederation found that only 7% of subcontractors used by its 32 biggest members were ready for the new regime.
No-one is ready for the scheme so this seems a good way forward
Stephen Lane, Partner at Masons
Stephen Lane, a tax partner at law firm Masons, said: "No one is ready for the new scheme, so this seems a good way forward. It is quite clear that our clients need practical help from the Inland Revenue." The Revenue cannot, however, delay the introduction of the new scheme because the start date is enshrined in legislation, and contractors cannot use the CIS for some subcontractors and not for others because of the complexity involved.
The extent of the industry's difficulties with the new system are becoming clearer by the day. Last week, Mowlem's main construction arm and its facilities management arm Aqumen were told by the tax office in Liverpool that it had lost their paperwork.
Mowlem must now reapply, making it difficult to reach the 1 August deadline, even though the Revenue has promised to rush through its application.
Last week, the Revenue announced its first transitional measure. It said that subcontractors that have not received certificates by 1 August can go to their local tax offices for temporary substitutes.
They must bring a recent passport-style photograph, two forms of identification, National Insurance details and proof that they have applied for the full certificate. If they comply with these conditions they will be given a temporary card, to be known as a CIS65. More transitional measures are to be announced this week.
