PART 1: DATES, DEFINITIONS AND OBLIGATIONS
A maximum value of £30,000 of approved options may be offered per participant, and no participant may own more than 25% of the company. Income Tax is not chargeable at the time the option is granted or on any increase in the value of shares, provided: • the option is exercised at least 3 years and not more than 10 years after the date granted, or if exercised within 3 years it is done so under a provision within the scheme which allows exercise on cessation due to injury, disability, redundancy or retirement after reaching an age specified within the scheme and exercise is within 6 months of that cessation. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS For capital gains tax purposes the cost is normally the price paid for the shares. CONSTRUCTION INDUSTRY SCHEME (CIS) First introduced under the Income and Corporation Taxes Act 1988, significant changes were introduced in the ‘New’ CIS scheme introduced on 6th April 2007. The scheme sets out the principles to be applied by a contractor, and certain other businesses, for making set deductions from that part of payment that does not represent costs of materials, when making a payment to a subcontractor under any contract related to construction work carried out in the UK. Workers in the construction industry are engaged either by: • a contractor (a business or other concern paying subcontractors for work) • a subcontractor (a business that carries out work for a contractor), or are self-employed. N.B. A business may be both a contractor and subcontractor. A construction company or building firm may include government departments or local authorities who are referred to as “deemed contractors”. Definition of construction All construction work (to either a permanent or temporary building structure), carried out in the UK, including offshore work within the 12 mile territorial limit, comes within the terms of the scheme, and includes alteration, construction, decoration, demolition, dismantling, site preparation and repair. Within the official guidance (CIS340) there are many examples to clarify these definitions and contractors are advised to consult this, even if it appears obvious that a particular activity is either included in the scheme or not. Definition of contractor Within the terms of the scheme a business or concern is a ‘contractor’ if its average annual expenditure on construction work, in the three year period ending with its last accounting date, exceeds £1 million. A business or concern ‘deemed’ a contractor that has not been trading for the whole of the last three years, also qualifies if construction operations for part of that period exceed £3 million. A ‘deemed contractor’, will continue to be so until its construction expenditure has been less than £1 million in each of three successive years. No printing, copying or reproduction permitted. Local managers of decentralised premises, for example schools, may be excluded from the scheme where their construction operations are less than £1,000. Those undertaking their own build or repair operations, for example homeowners, are not covered by CIS.
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