As new CIS (Construction Industry Scheme) rules come in from April 6, pressure mounts on construction companies to spot CIS fraud from subcontractors throughout their entire supply chains, says RSM UK.

The CIS scheme means any business who sub-contracts construction work may need to pay 20-30% of the agreed fees directly to HMRC as advanced payment of the subcontractors’ tax liability. This is to reduce the risk of fraud and non-payment of tax. However, many large construction companies have ‘gross payment status’, meaning they don’t suffer these deductions.

Peter Graham, Tax Lead for Real Estate and Construction, RSM UK said: “As of April 6, construction companies with gross payment status who fail to spot CIS fraud at any point in their supply chain could lose their gross payment status for five years. They could also lose their status if they make a CIS return showing CIS tax deducted which they knew, or should have known, was not deducted or paid. Losing gross payment status is incredibly damaging for businesses, as this makes them far less likely to win contracts for large construction projects. In addition, they could also be charged a hefty fine, and be held responsible for paying the tax lost due to fraud.

“Company officers such as directors could themselves also be held personally liable for a penalty. This change puts huge pressure on construction companies to undertake the required due diligence to detect fraud throughout their entire supply chains and is a significant change from the previous CIS rules.”

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