CIS - Part 1 - An Introduction
CIS - Part 1 - An Introduction
CIS - Part 1 - An Introduction
In 2004 HM Revenue & Customs estimated that there were about 970,000 small businesses and 4,000 medium and large businesses affected by their CIS scheme.
Latest scheme
The latest scheme has done away with cards and vouchers and true to current form HM Revenue & Customs have placed the responsibility for determining the status of the worker squarely on the contractor.
Sub-contractors new to the scheme need to register with HM Revenue & Customs.
Contractors must make a return every month showing the payments made to sub- contractors and NIL returns must be made where there are no payments in any month.
There is a penalty for failure to comply.
Contractors must also complete the new monthly declaration saying that they have reviewed the individual employment status of each subcontractor!!
Monies can be paid in full or after deducting tax at 20% or 30%.
There is no requirement to submit an annual return.
HM Revenue & Customs will tell the contractor the applicable rate. The maximum penalty for not deducting tax when it should have been is 100% of the tax that should have been paid over.
Deemed contractors
The other bodies brought within the scheme are:-
Certain trades and bodies who are not normally considered to be contractors are brought within the scheme if they carry on a business and their average expenditure on construction operations in the three years ending with the last period of account is in excess of 1,000,000.
The other bodies brought within the scheme are:
Labour agencies
Staff Bureaus
Gang masters and gang leaders
Property developers
Housing associations
Local authorities
Government departments
Public bodies
The scheme covers all construction work to include inter alia:-
Site preparation
Alterations
Dismantling
Construction
Repairs
Decorating
Demolition
Definitions Contractor
The definition of a contractor is a person who pays sub-contractors to provide services for the construction or building industries. Also you are a "deemed" contractor if you run a business that spends 1 million or more a year over a three year period on construction operations.
If you are a CIS contractor you have an obligation to register with HM Revenue & Customs before you take on your first sub-contractor. You can register online, by email or telephoning the new employers helpline on 0845 607 0143. You will need to know both your national insurance number and your unique taxpayer's reference.
Definitions Sub Contractor
The definition of a sub-contractor is someone who provides services to someone else in the construction or building industry either yourself or by supplying other people.
Neither employee nor sub contractor is defined in the Taxes Acts.
Common law differentiates on the basis that an employee has a contract of employment whereas a self- employed person works to a contract for service.
Next article CIS - Part 2 - Sub-Contractors
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