What about the effect of IR35 on construction industry workers who are also within the Construction Industry Scheme (CIS)?

To come within both IR35 and CIS, a subcontractor must be working through a Personal Service Company or partnership in such a way that, in the absence of the PSC or partnership, he or she would have been an employee of the client.

Section 559A ICTA 1988 (which supersedes Extra Statutory Concession C32) and now s 62 (3) F.A.2004 for the new scheme, allows a company to avoid paying tax twice on the same money, if it claims its repayment of CIS deductions before 31 January following the end of the tax year for which the IR35 deemed salary payment has been calculated. If a PSC informs HMRC, when it sends in its end-of-year employer's return, that it wants to defer paying the tax due under the IR35 rules, it will be able to set the CIS repayment against the PAYE and NICs it owes, so that it will not have to pay two lots of tax.

Where such a claim is made (and accepted) this means that interest will not be charged on any late paid tax and NICs due under the IR35 rules to the extent that late paid tax and NICs is matched by the CT repayment due to the company, up to the date of the repayment of the CT.

Companies will need to include enough information in their claim to identify the amounts to be matched, including:

• their accounting period(s)
• the amount of the CIS deductions to be matched
• the statements of deduction providing evidence of the dates and the deductions suffered
• the date of the deemed payment calculation (if not 5 April)
• the amount of PAYE and NICs to be matched
  

Claims in respect of tax and NICs due by 19 April 2001 under the IR35 rules must be made by the following 31 January.

Note: Section 40 FA 2002 inserted S559A ICTA 1988 which now allows CIS deductions to be set off against a company's PAYE/NICs liability, and therefore renders ESC C32 obsolete.