A CIS subcontractors is a self-employed person, owner of a limited company or a partnership working for a contractor under their own terms. The scheme contains proper regulations by HMRC for how individual or organization works under any construction company should paid. According to the CIS scheme rules, every Contractor must register. Otherwise deduction are taken from their payments.
Currently an advance payment of income tax, at 20% is deducted from the subcontractor’s fee, unregistered subcontractors are charged at 30% and advised on a payment voucher issued by contractor. However a “gross payment status” can be applied for when registering with HMRC so that no deductions are made at all by the contractor at source.
As a contractor you are obliged to:
- Must register as a contractor with HMRC.
- Must distinguish between employees and self-employed staff status for the proper application if cis rules.
- Must verify the status of the cis payment recipient.
- Deduct tax at appropriate rate governed by the registration status of the recipient.
- Must give a written statement (voucher) to subcontractor for the payment (gross or net) and the tax deduction made.
- Maintain records of the gross amount made, cost of materials and tax deductions.
- Must file a monthly return (cis300) of its payments to subcontractors to HMRC, whether any payments were made during that period or not.
We can provide these administrational and payment services and give you peace of mind to run your business and comfort in knowing your subcontractors are being well cared for.
Being a registered employer with HMRC under PAYE does not automatically entitles a construction industry contractor to hire Sub-contractors under CIS scheme. A separate registration is required for this purpose. Accountants in Windsor, according to your business needs can work out a full set-up and get your dual registration sorted out with HMRC, enabling you to operate PAYE and CIS side by side. We can also help your subcontractors with their self-assessment obligations. Registering them, keeping their accounts and submitting their annual returns.
As a subcontractor you are obliged to:
- Must keep sufficient records for the tax return completion.
- Notify HMRC of any changes in the business circumstance, e.g. change in business ownership, structure or address, or if it ceases to trade.
- Provide full details to contractor for cis verification purposes.
- Liable to varied tax penalties if during registration makes a false statement or provides a false document or unable to produce books & records.
- Registration for gross payments can be cancelled if fails to comply with the three eligibility tests.
All contractors and subcontractors have to get cis registration done before they undertake any job. Whilst the administration of CIS may be seen as somewhat time consuming and cumbersome on already overstretched business, it also acts as a safeguard against potential tax evaders.
Being a contractor under CIS regime requires compliance to some additional duties in terms of not only checking the sub-contactor’s status for correct deduction of taxes but also filing of monthly online CIS300 report and keeping up to date underlying records.
We offer a comprehensive service to our contractor clients and this includes but is not restricted to:
- Verifying and validating subcontractors
- Preparing and submitting the monthly contractor return
- Submitting the CIS returns to HMRC
- Informing you of any payment that needs to be made to HMRC
- Claiming back excess CIS sat the end of the year
- Negotiating with HMRC should the need arise.