Please do get in touch if you would like further information about the Construction Industry Scheme (CIS). Whether you are a contractor or a subcontractor, at Adiva Accountants in London we can advise on the CIS for your business in Bromley, Kent and London.
The whole CIS system is backed up by a series of significant penalties. These penalties cover situations in which an incorrect monthly return is sent in negligently or fraudulently. Or for failure to provide CIS records for HMRC to inspect and incorrect declarations about employment status. Penalties are triggered by late returns under the CIS scheme as follows:
- a basic penalty of £100 for failure to meet due date of the 19th of the following month
- where the failure continues after two months after the due date, a penalty of £200
- after six months, the penalty rises to the greater of 5% of the tax, or £300
- after 12 months, the penalty will again be the greater of £300, or 5% of the tax
- where information is withheld deliberately, the penalty is 70% of tax, or £1,500 if greater
- where the withholding of information is deliberate and concealed, it will be 100% of the tax, or £3,000 if greater
- where the return is 12 months late, but the information only relates to persons registered for gross payment (so no tax deduction was due). The penalty will be £1,500 for deliberate withholding without concealment, and the penalty will be £3,000 for deliberate and concealed withholding of information
- where a person has just entered the CIS scheme penalties will be restricted to a maximum of £3,000 in certain circumstances
If you need help with penalties, or for anything else in relation to CIS scheme, please contact us at Adiva Accountants in London and we will be happy to help you.
There are three requirements for subcontractors to be paid gross. They include a business test, a turnover test and a compliance test. To qualify for gross payment a subcontractor must:
- have paid their tax and National Insurance on time in the past
- do construction work (or provides labour for it) in the UK
- run the business through a bank account.
The turnover for the last 12 month (ignoring VAT and the cost of materials) must be at least:
- £30,000 for a sole trader
- £30,000 for each partner in a partnership, or at least £100,000 for the whole partnership
- £30,000 for each director of a company, or at least £100,000 for the whole company
If your company is controlled by 5 people or fewer, you must have an annual turnover of £30,000 for each of them.
Subcontractors not registered with the HMRC will suffer the higher rate deduction (30%) from any payments made to them by contractors.
The contractor has to contact HMRC to find if he should pay a subcontractor gross or net. You don’t have to verify all the subcontractors all the time. You would normally verify only the new ones. The verification procedure will establish which of the following payment options apply:
- gross payment (no deductions made)
- a standard rate deduction of 20%
- a deduction made at the higher rate of 30%, if the subcontractor has not registered for CIS with HMRC. Or cannot provide accurate details to the contractor and HMRC cannot verify them.
HMRC will give the contractor a verification number for the subcontractors which will be matched with HMRC’s own computer. This number will be the same for each subcontractor verified at any particular time. Subcontractors who cannot be verified will have special suffixes for the numbers. The numbers are also shown on the payslips issued to the subcontractors and on contractors’ monthly returns.
These numbers are important and contractors have to ensure that they have a good system in place for obtaining and retaining them. It is crucially important to give precise details to HMRC. As the higher rate deduction (30%) will have to be made, if their computer does not recognise the subcontractor. Mandatory online verification of subcontractors will be introduced from 6 April 2017.
The contractor will not have to verify the subcontractor if they have already included them on any monthly return in the two previous tax years.
Payslips
All subcontractors have to be provided with at least a monthly ‘payslip’. It should show the total amount of the payments and how much tax, if any, has the contractor deducted from those payments. Payslips can have different styles, but certain specific information has to be provided including the:
- contractor’s name and their employer tax reference
- subcontractor’s name, unique tax reference or specific subcontractor reference
- tax month to which the payment relates
- the gross amount of the payment
- cost of any materials which have reduced the gross payment
- amount of any tax deductions made and
- verification number where deduction has been made at the higher rate of 30%.
If contractors include such payments as part of their normal payroll system, it has to be clear that they are classed as self-employed.
If you need help with the payroll of the subcontractors, or for anything else in relation to CIS scheme, please contact us at Adiva Accountants in London and we will be happy to assist you.
Not always. The items below should be excluded when entering the gross amount of payment on the monthly return:
- VAT charged by the subcontractor (if the subcontractor is registered for VAT)
- any Construction Industry Training Board levy.
Furthermore, when working out the amount of payment from which the deduction should be made, the following items should be deducted from the gross amount of payment:
- what the subcontractor paid for materials including VAT paid (if the subcontractor is not registered for VAT). Plus consumable stores, fuel (except fuel for travelling) and plant hire used in the construction operations
- the cost of manufacture or prefabrication of materials used in the construction operations.
The gross amount of payment and the amount from which the deduction is made should include any travelling expenses (including fuel costs) and subsistence paid to the subcontractor.
The deadline for paying over the deductions
The deadline for the contractors to pay over all deductions made from subcontractors is by the 19th following the end of the tax month to which the deductions relate. The deadline would be 22nd, if payment is being made electronically, or the next earlier banking day when the 22nd is a weekend or holiday. Often the contractor is a company which operates as a subcontractor and has deductions made from its payments as a subcontractor. In these circumstances, the deductions made may be set against the company’s liabilities for PAYE, NI and any CIS deductions it is due to pay over.
Subcontractors
A subcontractor will need to register for the CIS when first starts working in the construction industry on a self-employed basis. The registration is carried out by the subcontractor who needs to contact HMRC by phone or online.
If you need help with the registration of the subcontractors, or for anything else in relation to CIS scheme, please contact us at Adiva Accountants in London and we will be happy to help you.
The compliance requirements of the Construction Industry Scheme (CIS) need to be dealt from all those working in the construction industry. At Adiva Accountants in London, we can assist you to comply with the requirements of the Scheme for your business in Bromley, Kent and London.
The Construction Industry Scheme (CIS) sets out special rules for tax for those working in the construction industry. The CIS applies to construction work and also jobs such as alterations, decorating, repairs and demolition. Businesses in the construction industry are known as ‘contractors’ and ‘subcontractors’. They may be self employed individuals, companies, or partnerships.
Contractors and subcontractors
Contractors can include construction companies and building firms, but also local authorities and government departments. Any business which operates in CIS and spends more than £1 million a year on construction is classed as a contractor. Subcontractors are those businesses that carry out work for contractors. Actually, many businesses act as both contractors and subcontractors.
CIS returns
Online monthly returns must be submitted to HMRC by contractors confirming the following:
- that the verification process has been correctly dealt with
- that the employment status of subcontractors has been considered
- payment details made to all subcontractors and
- any details of tax deductions made from those payments
The monthly return relates to each tax month (ie running from the 6th of one month to the 5th of the next). The deadline for return submission is 14 days after the end of the tax month. A Nil return should be submitted where a contractor has not made any payments to subcontractors in a tax month. This will avoid penalties that HMRC can issue for failure to make a return. Even if the contractors are entitled to pay their PAYE quarterly, still they must file their returns monthly.
Identification
When they enter into a contract, subcontractors must give contractors their name, unique taxpayer reference (UTR) and national insurance number (or company registration number). The contractor should be satisfied that the subcontractor is genuinely self-employed, then follow the ‘verification’ procedure explained below.
If you need help with the CIS monthly returns or for anything else in relation to CIS scheme, please contact us at Adiva Accountants in London and we will be happy to help.
The contractor must consider the status of the subcontractors and to be satisfied that none of those listed on the return are employees. Penalties of up to £3,000 can be imposed by HMRC, if contractors negligently or deliberately provide incorrect information. It’s important to note that employment status is not a matter of choice. The specific circumstances of the engagement determine how it is treated.
The issue of the status of workers within the construction industry is very important. Over the years HMRC have been making efforts to re-classify as many subcontractors as possible as employees. Different factors are considered by the courts over the years in deciding whether a worker is self-employed or employed. The tests which are applied include:
- the right of control over how, what, where and when the work is done. The more control that a contractor can exercise over the above, the more likely it is that the worker is an employee.
- whether any equipment is necessary to do the job, and if so, who provides it
- the basis of payment – whether an hourly/weekly rate is paid. Whether there is any overtime, sick or holiday pay, and whether invoices are raised for the work done
- whether the worker provides a personal service, or whether a substitute could be provided to do that work
- whether there is a mutuality of obligation. That is, an ongoing understanding that the contractor will offer work and the worker accept it
- whether the worker is part and parcel of the organisation, or whether they are conducting a task which is self-contained in its own right
- what the intention of the parties is. Whether there is any written statement that there is no intention of an employment relationship
- whether the workers have any financial risk.
So, there are a number of factors which must be considered as to whether somebody should be classified as employed or self-employed.
The employment status indicator tool is available on HMRC website, to help address this matter. However, the software appears to be heavily weighted towards re-classifying subcontractors as employees. Please talk to us, if you have any particular concerns in this area and if this is a major issue for your business. It is obvious that HMRC would like subcontractors to be classed as employees, as this means that more tax and national insurance is due. However, just because the HMRC tool suggests that somebody is an employee, it does not necessarily mean that they are correct.
If you need help with the status of the subcontractors, or for anything else in relation to CIS scheme, please contact us at Adiva Accountants in London and we will be happy to assist you.
There are three requirements for subcontractors to be paid gross. They include a business test, a turnover test and a compliance test. To qualify for gross payment a subcontractor must:
- have paid their tax and National Insurance on time in the pastn
- do construction work (or provides labour for it) in the UKn
- run the business through a bank account.nThe turnover for the last 12 month (ignoring VAT and the cost of materials) must be at least:
- £30,000 for a sole tradern
- £30,000 for each partner in a partnership, or at least £100,000 for the whole partnershipn
- £30,000 for each director of a company, or at least £100,000 for the whole companynIf your company is controlled by 5 people or fewer, you must have an annual turnover of £30,000 for each of them.nSubcontractors not registered with the HMRC will suffer the higher rate deduction (30%) from any payments made to them by contractors.
Please do get in touch if you would like further information about the Construction Industry Scheme (CIS). Whether you are a contractor or a subcontractor, at Adiva Accountants in London we can advise on the CIS for your business in Bromley, Kent and London.
The compliance requirements of the Construction Industry Scheme (CIS) need to be dealt from all those working in the construction industry. At Adiva Accountants in London, we can assist you to comply with the requirements of the Scheme for your business in Bromley, Kent and London.
The Construction Industry Scheme (CIS) sets out special rules for tax for those working in the construction industry. The CIS applies to construction work and also jobs such as alterations, decorating, repairs and demolition. Businesses in the construction industry are known as ‘contractors’ and ‘subcontractors’. They may be self employed individuals, companies, or partnerships.
Contractors and subcontractors
Contractors can include construction companies and building firms, but also local authorities and government departments. Any business which operates in CIS and spends more than £1 million a year on construction is classed as a contractor. Subcontractors are those businesses that carry out work for contractors. Actually, many businesses act as both contractors and subcontractors.
CIS returns
Online monthly returns must be submitted to HMRC by contractors confirming the following:
- that the verification process has been correctly dealt with
- that the employment status of subcontractors has been considered
- payment details made to all subcontractors and
- any details of tax deductions made from those payments
The monthly return relates to each tax month (ie running from the 6th of one month to the 5th of the next). The deadline for return submission is 14 days after the end of the tax month. A Nil return should be submitted where a contractor has not made any payments to subcontractors in a tax month. This will avoid penalties that HMRC can issue for failure to make a return. Even if the contractors are entitled to pay their PAYE quarterly, still they must file their returns monthly.
Identification
When they enter into a contract, subcontractors must give contractors their name, unique taxpayer reference (UTR) and national insurance number (or company registration number). The contractor should be satisfied that the subcontractor is genuinely self-employed, then follow the ‘verification’ procedure explained below.
If you need help with the CIS monthly returns or for anything else in relation to CIS scheme, please contact us at Adiva Accountants in London and we will be happy to help.
The contractor must consider the status of the subcontractors and to be satisfied that none of those listed on the return are employees. Penalties of up to £3,000 can be imposed by HMRC, if contractors negligently or deliberately provide incorrect information. It’s important to note that employment status is not a matter of choice. The specific circumstances of the engagement determine how it is treated.
The issue of the status of workers within the construction industry is very important. Over the years HMRC have been making efforts to re-classify as many subcontractors as possible as employees. Different factors are considered by the courts over the years in deciding whether a worker is self-employed or employed. The tests which are applied include:
- the right of control over how, what, where and when the work is done. The more control that a contractor can exercise over the above, the more likely it is that the worker is an employee.
- whether any equipment is necessary to do the job, and if so, who provides it
- the basis of payment – whether an hourly/weekly rate is paid. Whether there is any overtime, sick or holiday pay, and whether invoices are raised for the work done
- whether the worker provides a personal service, or whether a substitute could be provided to do that work
- whether there is a mutuality of obligation. That is, an ongoing understanding that the contractor will offer work and the worker accept it
- whether the worker is part and parcel of the organisation, or whether they are conducting a task which is self-contained in its own right
- what the intention of the parties is. Whether there is any written statement that there is no intention of an employment relationship
- whether the workers have any financial risk.
So, there are a number of factors which must be considered as to whether somebody should be classified as employed or self-employed.
The employment status indicator tool is available on HMRC website, to help address this matter. However, the software appears to be heavily weighted towards re-classifying subcontractors as employees. Please talk to us, if you have any particular concerns in this area and if this is a major issue for your business. It is obvious that HMRC would like subcontractors to be classed as employees, as this means that more tax and national insurance is due. However, just because the HMRC tool suggests that somebody is an employee, it does not necessarily mean that they are correct.
If you need help with the status of the subcontractors, or for anything else in relation to CIS scheme, please contact us at Adiva Accountants in London and we will be happy to assist you.
The contractor has to contact HMRC to find if he should pay a subcontractor gross or net. You don’t have to verify all the subcontractors all the time. You would normally verify only the new ones. The verification procedure will establish which of the following payment options apply:
- gross payment (no deductions made)
- a standard rate deduction of 20%
- a deduction made at the higher rate of 30%, if the subcontractor has not registered for CIS with HMRC. Or cannot provide accurate details to the contractor and HMRC cannot verify them.
HMRC will give the contractor a verification number for the subcontractors which will be matched with HMRC’s own computer. This number will be the same for each subcontractor verified at any particular time. Subcontractors who cannot be verified will have special suffixes for the numbers. The numbers are also shown on the payslips issued to the subcontractors and on contractors’ monthly returns.
These numbers are important and contractors have to ensure that they have a good system in place for obtaining and retaining them. It is crucially important to give precise details to HMRC. As the higher rate deduction (30%) will have to be made, if their computer does not recognise the subcontractor. Mandatory online verification of subcontractors will be introduced from 6 April 2017.
The contractor will not have to verify the subcontractor if they have already included them on any monthly return in the two previous tax years.
Payslips
All subcontractors have to be provided with at least a monthly ‘payslip’. It should show the total amount of the payments and how much tax, if any, has the contractor deducted from those payments. Payslips can have different styles, but certain specific information has to be provided including the:
- contractor’s name and their employer tax reference
- subcontractor’s name, unique tax reference or specific subcontractor reference
- tax month to which the payment relates
- the gross amount of the payment
- cost of any materials which have reduced the gross payment
- amount of any tax deductions made and
- verification number where deduction has been made at the higher rate of 30%.
If contractors include such payments as part of their normal payroll system, it has to be clear that they are classed as self-employed.
If you need help with the payroll of the subcontractors, or for anything else in relation to CIS scheme, please contact us at Adiva Accountants in London and we will be happy to assist you.
Not always. The items below should be excluded when entering the gross amount of payment on the monthly return:
- VAT charged by the subcontractor (if the subcontractor is registered for VAT)
- any Construction Industry Training Board levy.
Furthermore, when working out the amount of payment from which the deduction should be made, the following items should be deducted from the gross amount of payment:
- what the subcontractor paid for materials including VAT paid (if the subcontractor is not registered for VAT). Plus consumable stores, fuel (except fuel for travelling) and plant hire used in the construction operations
- the cost of manufacture or prefabrication of materials used in the construction operations.
The gross amount of payment and the amount from which the deduction is made should include any travelling expenses (including fuel costs) and subsistence paid to the subcontractor.
The deadline for paying over the deductions
The deadline for the contractors to pay over all deductions made from subcontractors is by the 19th following the end of the tax month to which the deductions relate. The deadline would be 22nd, if payment is being made electronically, or the next earlier banking day when the 22nd is a weekend or holiday. Often the contractor is a company which operates as a subcontractor and has deductions made from its payments as a subcontractor. In these circumstances, the deductions made may be set against the company’s liabilities for PAYE, NI and any CIS deductions it is due to pay over.
Subcontractors
A subcontractor will need to register for the CIS when first starts working in the construction industry on a self-employed basis. The registration is carried out by the subcontractor who needs to contact HMRC by phone or online.
If you need help with the registration of the subcontractors, or for anything else in relation to CIS scheme, please contact us at Adiva Accountants in London and we will be happy to help you.
The whole CIS system is backed up by a series of significant penalties. These penalties cover situations in which an incorrect monthly return is sent in negligently or fraudulently. Or for failure to provide CIS records for HMRC to inspect and incorrect declarations about employment status. Penalties are triggered by late returns under the CIS scheme as follows:
- a basic penalty of £100 for failure to meet due date of the 19th of the following month
- where the failure continues after two months after the due date, a penalty of £200
- after six months, the penalty rises to the greater of 5% of the tax, or £300
- after 12 months, the penalty will again be the greater of £300, or 5% of the tax
- where information is withheld deliberately, the penalty is 70% of tax, or £1,500 if greater
- where the withholding of information is deliberate and concealed, it will be 100% of the tax, or £3,000 if greater
- where the return is 12 months late, but the information only relates to persons registered for gross payment (so no tax deduction was due). The penalty will be £1,500 for deliberate withholding without concealment, and the penalty will be £3,000 for deliberate and concealed withholding of information
- where a person has just entered the CIS scheme penalties will be restricted to a maximum of £3,000 in certain circumstances
If you need help with penalties, or for anything else in relation to CIS scheme, please contact us at Adiva Accountants in London and we will be happy to help you.
