CIS Services 

In April this year HMRC introduced a number of changes to CIS legislation including compulsory online filing of CIS Returns.

There are also more changes to follow in April 2017 including compulsory online verification of new subcontractors.

If you are operating a construction related business and are required to file CIS Returns, it is a worthwhile consideration to look at outsourcing this work to an experienced provider.

In addition to our payroll service we provide a tailored CIS service for all businesses operating in the Construction Industry, this service includes:

  • Online Subcontractor Verification
  • Calculation of deductions
  • Preparation of Payment Certificates for subcontractors
  • Preparation and online submission of monthly CIS returns to HMRC

If you would like more time to focus on growing your business and cut down on your admin costs why not outsource your CIS duties to us?

We pride ourselves on running an efficient service and normally produce returns within 24 hours of receiving subcontractor invoices.

You also get the back up of staff experienced in CIS and we can help to ensure that your business is compliant and most importantly that your returns are always filed on time.

Should HMRC ever need to inspect your CIS records we hold everything securely on file and can help with this as well.

This service is competitively priced so why not give us a call and request a quote.

Call us on 01474 561153 or 853856 and speak to Paul Wood, Managing Partner of A4G Payroll LLP

What is Cis?

The Construction Industry Scheme (CIS) is a way of taxing contractors and subcontractors in the construction industry. The aim of the scheme is to reduce tax evasion within this industry.

CIS applies to all contractors and subcontractors, whether that is a sole trade or limited company, operating in the mainstream construction industry. Work that matches the term 'construction' includes general building (such as bricklaying, plastering, and roofing) groundwork, alterations, repairs and demolition.

If you are not certain on whether you are required to comply with CIS it is a good idea to check HMRC’s guidance or call HMRC’s CIS Helpline on 0300 200 3210.

CIS applies to all payments made by a contractor to a subcontractor under a construction contract. It is important to note that compliance failures can quickly lead to hefty penalties.

Registration for CIS

All contractors and subcontractors are required to register with the Scheme before any construction starts.

Contractors can register using HMRC's online service. To set up a new scheme for a Sole Trader HMRC will need the Trading name, contact details, unique taxpayer reference (UTR), NI number and date of the first payday. Partnerships and limited companies will need to supply additional information including company number. HMRC will then set up a contractor scheme for the business.

For subcontractors registering, HMRC will need to know the name of the business or the individual's name plus UTR and NI number.

A contractor must do two things before a subcontractor can be paid:

  • confirm the subcontractor's employment status as self-employed. If not, the CIS scheme does not apply and the subcontractor has to be paid through PAYE via payroll.
  • check whether the subcontractor has to be verified to HMRC and if necessary verify the subcontractor through HMRC’s online service or through third party commercial software. (If the subcontractor has not been included in the contractor's monthly CIS return in the current tax year or one of the two years before, the contractor must verify his or her details with HMRC).

Once this is complete, the verification process will confirm the rate at which tax must be deducted and it will be one of three tax rates shown below:

  • 30% (excluding VAT and cost of materials or plant hire) from any subcontractor who is not registered under CIS (Otherwise known as Unmatched)
  • 20% (excluding VAT and cost of materials or plant hire) from any subcontractor who is registered but who is not eligible to receive gross payments.(Otherwise known as standard or net)
  • No deductions are made on any payment if the subcontractor is eligible to receive gross payments.

Contractors must provide subcontractors with a CIS voucher or certificate confirming any deductions and submit CIS returns to HMRC at the end of each month. From April 2016 this must be sent as an electronic submission, either through the HMRC CIS Online Service or through third party commercial software. Paper returns will no longer be accepted.

Gross payment Status

Subcontractors that meet the three criteria below are eligible to receive their payments gross (without tax deduction):

  • Business test

Construction work is carried out in the UK, and run largely through a bank account.

  • Turnover test

For individuals and sole traders, annual turnover is £30,000 or more (excluding VAT and cost of materials). The figure is higher for partnerships and most companies.

  • Compliance test

There are no outstanding tax returns or payments due. HMRC will ignore minor compliance failures, such as a late filed Self Assessment returns or late payment, but if there is more than one offence HMRC may deny or revoke gross payment status.

At the end of the financial year self-employed subcontractors need to submit a Self Assessment tax return and company contractors a corporation tax return. HMRC will determine what tax or National Insurance is due and offset any CIS deductions made. However in order to claim a refund of CIS tax payment vouchers or certificates must be retained by the taxpayer as evidence of tax deducted. HMRC will not provide details of tax deducted and so it is up to the subcontractor to ensure that he or she retains this essential paperwork.

Penalties

As mentioned earlier HMRC operates an extremely tough penalty regime for those within the CIS scheme. Contractors need to ensure that they keep not only their books and records up to date but also that they are not late in submitting returns or making payments of CIS tax deducted.

Employment Status issues – are your subcontractors employed or self-employed?

Contractors are obliged to decide if their workers are to be either employed or classed as self-employed.

A worker might be self-employed in one contract and employed on the next one. Being registered as a CIS subcontractor doesn’t mean that they are automatically self-employed for any work they do in the construction industry.

Normally the contractor will incur big tax liability if HMRC decides that the contractor’s workers should actually be classed as employees rather than subcontractors so it is hugely important to get this right. Even as a subcontractor you need to take care.

If you have any doubts or concerns about a subcontractor’s employment status, you should contact HMRC or take professional advice.

Inflated Refunds and poor advisors

There are many unscrupulous advisors around because CIS subcontractors are often entitled to tax refunds. These advisors are likely to inflate the tax refund due by adding fictitious expenses to reduce the taxable profits, increasing the tax refund (and their fee if it is a percentage of the refund).

Whilst the prospect of bigger refunds might appeal to some, an investigation from HMRC into your CIS records is likely to lead to big problems further down the line.

We will not artificially inflate returns or work with a business that requires us to do this.