The Isle of Man Construction Industry Scheme

What is the Scheme?

The scheme came into operation in 1988 when, in accordance with Section 6 of the Income Tax (Instalment Payments) Act 1974, the Assessor issued a direction introducing a tax deduction scheme for subcontractors engaged in the construction industry.

The scheme applies to individuals or businesses working in the construction industry and should be operated by contractors in a similar manner to the Income Tax Instalment Payments (ITIP) system operated by employers. Under the scheme, tax should be deducted from a subcontractor’s wage or salary (where applicable) by the contractor on each pay day. The deducted amounts are credited to the appropriate subcontractor at the end of the year and are then offset against the income tax payable on that subcontractor’s assessment.

The scheme ensures that any payments made by a contractor to a subcontractor in respect of construction activities are properly recorded and reported, that subcontractor tax exemption certificates are checked where appropriate, and that any income tax due in respect of the payments is correctly deducted and then paid to the Income Tax Division on a timely basis in accordance with the legislation.

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