The new Construction Industry Scheme (CIS) has resulted in a considerable amount of extra administration work, paired with extra exposure to severe penalties for non-compliance.
The CIS applies to all businesses in the construction industry - builders, developers, contractors, plumbers, electricians, roofers, bricklayers, carpenters, glaziers and many other trades. In some cases it also applies to services like landscaping and cleaning. However, it does not apply to professional services such as surveying and architectural work.
The CIS makes contractors check the registration details of sub-contractors that they use, which may include deducting tax at the source from payments made to them.
Contractors must now complete monthly CIS returns due on the 19th of each following month - otherwise they will be fined £100 for each month the return is late. Penalties can also apply for incorrect returns.
Central to the CIS is the issue of employment status – is someone working for you either employed or self-employed? There are strict rules to be followed for this and you should not just assume someone is self-employed. This must always be checked out and the responsibility for these checks lies with the contractor, not the sub-contractor. Regular reviews should be carried out by contractors on the classification of each worker to ensure that the self-employment status is correct.
Penalties and Back Tax
Regular inspections of contractors’ records are carried out by HM Revenue and Customs (HMRC). Where HMRC think that sub-contractors are being treated as self-employed, penalties and a back tax bill will follow.
Look out for yourself
You can strengthen the self-employment status of workers by following some simple steps: for example, drawing up a contract that reflects genuine working arrangements. This and many other steps can be easily implemented.
We can help guide you through the CIS web. JHP offer the following CIS services:
- Sub-contractor verification
- Calculation of deductions
- Preparation of payment statements
- Preparation and submission of monthly returns.
For more information please contact us.