Uncle Audley is taken aghast by the new CIS rules

We had a family lunch last weekend and my cousin Harvey was present. We had not seen him for some time socially as Harvey had been working night and day in the family business after a serious of unfortunate events had left him with his back against the wall. Unfortunately his father Gerald is no longer with us but Uncle Audley had acted for his building business, that Harvey took over, for many years and Harvey and I were updating Audley about the most recent changes to the Construction Industry Scheme and their effect upon the company.

Uncle Audley, after a post lunch diet of brandy began waxing lyrically about the good old days on the tools, when Gerald was a brickie and built many a fine structure with his bare hands.

“I remember The Lump. Gerald used to turn up on the sites when he wanted work, and the main contactors would pick and choose who they wanted that day. Sometimes he even paid tax as I recall! Then in 1972 the Taxman changed it all, and had to register everyone and have vouchers and tax deducted at source and refunds later, and it all got very complicated. We got by because Gerald was quite organised but it was not all that straight forward for some of the other clients who began turning up needing help.”

Harvey and I told Audley about the changes in 1999 so that the paperwork was different, although not too much so and then about the changes in April of this year all this year where they make it more complicated without vouchers and the monthly returns from the contractors, and there are fines if these are late.

The changes were clearly lost on Audley – as they have been on many operating within the construction Industry. “I can’t understand what is going on nowadays, I’m sure the Taxman is just trying to make more work for himself. What I really have difficulty with is the way that they say this is all done to help the businesses, and they keep going on about encouraging entrepreneurs. Harvey used to play in the sand when he was a nipper and got pretty good at putting bricks one on top of the other – he used to ask his Dad to let him play with the cement mixer when he got in from school as I recall. I’m glad he took it up – he’s got himself a proper little empire, the old company I formed for his Dad now nearly turns over £1,000,000 a year.”

It was at this point that Harvey felt the need to unburden to Audley that all was not well and the previous turnovers had fallen somewhat. “What with one thing and another, a few bad debts, a few too many unprofitable contracts, I was in a bit of a tight spot when it came to paying the company’s tax last year and they took away my gross payment certificate.” I took over explaining the debits and credits so that Audley had the full picture.

As the penny dropped he became incandescent, “So now he receives his money after tax has been deducted, and yet many of the subbies he uses are themselves are on gross payment certificates and he therefore has to pay out more than he actually gets in on some contracts. That seems ludicrous to me. So this job he took for Beastly Homes, the main contractors, paid him £200,000 less tax of 20%, and he got £160,000, but he had to pay out £180,000 to Rotten Builders Ltd for doing it. On paper, I make that £20,000 profit but in fact he’s £20,000 out of pocket until after all the tax and accounts are sorted next year. A family business brought to its knees through a couple of innocent errors. Everyone makes a mistake in this life surely Harvey might have some grounds for appeal”

“Unfortunately not”, I advised, “they removed them in the recent changes.”

“No wonder he doesn’t know what to do and is thinking of chucking it all in. Harvey, you cannot do it don’t let them grind you down. I’ll compose a letter overnight and get it off to my MP in the morning.”

It was kind of Audley to think of doing this but tell me Mr Brown, what should Harvey do?

Date:8 October 2007