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Tax Tip

CONSTRUCTION INDUSTRY SCHEME (CIS) 11/08/2011

CIS applies to all businesses in the construction industry – builders, developers, contractors, plumbers, electricians, plasterers, carpenters, roofers, bricklayers, glaziers, and many other trades. In some instances it also may apply to services such as landscaping and cleaning.
The Construction Industry is one area that is always under close scrutiny from the HMRC and even a small error whether in compliance or judgement, can result in severe financial consequences.
ABDS can help you to avoid any such errors as we have more than 30 years’ experience dealing with various businesses in the construction industry. We are always up to date with the ever changing CIS regulations and we can notify our clients quickly of any changes that may affect them.
Contractors: As a contractor, you are required to meet specific obligations under the scheme, including registering with HM Revenue and Customs (HMRC), checking whether your subcontractors are registered with HMRC, paying subcontractors, deducting tax and submitting
monthly statements to your subcontractors confirming these payments.
Services we provide for contractors:
• Register you with HMRC as a contractor.
• Determine your subcontractors’ status as a subcontractor or employee.
• Verify your subcontractors with HMRC.
• Ensure you pay your subcontractors correctly within the scheme.
• Supply monthly deduction statements to the subcontractors.
• Submit monthly CIS Returns.
Subcontractors: If you are a subcontractor, your main obligation is to register with HMRC. You must also keep HMRC informed of any changes to your business such as changes to your business address, business name, business partners and other relevant information.
Services we provide for subcontractors:
• Register you with HMRC.
• Provide advice on whether you should be trading as an individual or a limited company which may reduce the amount of tax you pay ultimately.
• Manage and organise your business records.
• Prepare your end of year self-assessment tax return and calculate your tax liability/ refund where applicable.
• Apply for Gross payment status whereby you would be paid by the contractors without deducting any tax which would in turn be beneficial to your cash flow besides lending you a degree of status.
EMPLOYMENT STATUS – THE CONFUSION

Whether someone is employed or self-employed is one of the major grey areas in the tax system and if you get it wrong it can result in substantial financial implications by way of back taxes. It is absolutely necessary that as a contractor you get it right in the first place whether someone working for you is a self-employed sub-contractor or an employee and that necessary contracts are in place between both parties.

Listed below are some of the distinctions between the two and the related tax implications:

Features of employment and self-employment

Employment                                                          Self Employment

Various employment protection rights              Little in the way of employment rights

Cannot easily be dismissed                               Hire and fire very easily

Workplace health & safety protection                Workplace health & safety protection
  
Redundancy protection                                        No redundancy protection

Paid holidays                                                         No paid holidays

(normally) Sick pay                                               No sick pay

Paid under deduction of PAYE                           Normally paid with no tax deducted
(National Insurance and Income Tax)              (but see CIS rules)

Employers National Insurance incurred          No employers NI by engager

Workers NI at employment rates                       Workers NI at lower self-employed rates

Little chance for the worker to claim                 Worker can claim an assortment of
expenses                                                               expenses 


We have attempted to summarise the salient parts of the rather large bit of legislation concerning the construction industry and having read the above if you need any clarification please do not hesitate to contact our CIS Team and we will be happy to help.

 

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