Osborne Clarke responds to consultation to reform the UK Construction Industry Scheme

As outlined in our previous Insight, the UK government has published a consultation on three areas to strengthen and simplify the Construction Industry Scheme (CIS), with one of the main focuses on the removal of unnecessary administrative burdens on landlord and tenant relationships.  

The consultation, which ran from 27 April 2023 to 20 July 2023, was part of a package of technical tax policy proposals published to modernise the tax system, tackle non-compliance, make the tax system fairer for taxpayers and work better for traders.  

Consultation response 

Osborne Clarke, in a response to the consultation, supports the government's aim to strengthen and simplify the CIS in the two key areas where there are significant opportunities to do this:  

• the proposals to remove unnecessary administrative burdens on landlord and tenant relationships by treating landlord to tenant payments as being outside the scope of CIS; and  
• the proposals to introduce a group compliance function to relieve the administrative burden on large groups. 

Landlord and tenant relationships 

We highlighted in our response that treating landlord to tenant payments as being outside the scope of CIS will create certainty, simplify compliance, and prevent the unintended consequence of tenants who use the property in their business falling within the scope of CIS. The CIS rules also impose an administration reporting burden on landlords and removing them from the scope of the CIS would be welcome. 

As it can sometimes be difficult to be certain whether a contribution is for so-called landlord works or tenant works, removing them from the scope of the CIS would also save time that is often spent under the current regime working through whether CIS applies or not to such payments.  

Group compliance functionality 

We commented that, based on our knowledge of the CIS burdens on large groups, a grouping arrangement would be a positive step in easing some of the administrative burdens required for large groups.  

We suggested, however, that care would need to be taken with the solution proposed in the consultation to ensure that it was fit for purpose. For example, the proposal to limit the group definition to corporate vehicles would exclude common vehicles used to own property such as a partnership or unit trust. We also recommended that if group arrangements are put in place, there should be a voluntary mechanism for the nominated company to pay all amounts due (that is, from withholdings) rather than requiring individual companies to submit payments. 

Osborne Clarke comment 

Our response to the consultation welcomes the government's proposals to simplify the CIS for landlords, however, it also highlights areas that require further consideration to ensure the proposed solutions work from a practical perspective. 

In addition to the detailed comments we made in our response around landlord and tenant relationships and group compliance functionality, we raised other issues that could be considered to simplify the operation of CIS – for example the need for certain aspects to be dealt with digitally and not by correspondence. 

If you would like to discuss the consultation and our response in more detail, please speak to one of the contacts below.