§ Brian CotterTo ask the Chancellor of the Exchequer what the evidential basis was for his Department's decision to maintain the £30,000 turnover test for sub-contractors to receive gross payments under the Construction Industry Scheme; and what advice he received from the Inland Revenue on this matter during the recent review of the scheme. [156681]
§ Dawn PrimaroloThere has been a specialised taxation scheme for the construction industry since the 1970s to regulate an industry with a long history of poor compliance on taxation matters. The original scheme required a deduction to be made from payments unless the subcontractor could meet certain standards, which allowed him to be paid gross. However, this system failed to limit the numbers receiving gross payment.
The Construction Industry Scheme (CIS) was introduced in Finance Act 1995 and implemented from August 1999. It tightened up the criteria for gaining a gross payment certificate by requiring all subcontractors applying for gross payment status to demonstrate a minimum level of turnover. This approach proved successful and safeguarded monies that were previously at risk to the Exchequer under its predecessor.
The current review of CIS followed industry complaints about its cumbersome processes. The Chancellor announced, in Budget 2003 that the CIS would be replaced by a new system that will relieve some of the industry's administrative burden.
The Inland Revenue has consulted extensively with industry representatives on the detail of the new scheme, including the criteria for gross payment status. Alternatives to the turnover test were suggested by the
592W
Gross weekly earnings of full-time employees in Scotland in 2003 £ per week Male Female All Area Mean Median Mean Median Mean Median Scotland 483.7 409.5 372.4 323.8 436.8 373.1 Local Authorities Aberdeen City 591.4 507.8 417.7 363.9 524.7 441.1 Aberdeenshire 479.3 418.5 336.9 292.2 422.2 367.4 Angus 1— 1— 344.1 298.6 398.3 335.9 Argyll & Bute 400.1 375.6 1— 1— 381.2 358.0 Scottish Borders, The 1— 1— 1— 1— 355.6 299.9 Dumfries & Galloway 407.6 358.1 1— 1— 381.6 322.5 Dundee City 482.4 421.9 376.0 336.0 436.8 392.4 East Ayrshire 1— 1— 1— 1— 425.7 380.3 East Lothian 1— 1— 1— 1— 394.8 365.2 Edinburgh, City of 509.0 426.8 409.2 352.0 467.0 393.5 industry but none was as effective in restricting the number of subcontractors obtaining gross payment required to preserve the effectiveness of the scheme.
Successive Governments have accepted that it is not appropriate to disclose the advice given to Ministers by civil servants.