CIS
After two false starts, H M Revenue & Customs
are now to implement the new Construction Industry Scheme (CIS)
rules with effect from 6th April 2007. One of the key objectives
of these new rules is to force all Builders
& Contractors to tighten up their tax compliance on the
use of Sub-contract labour.
The new CIS rules now require much stricter considerations
of the Sub-contractors employment status – each month under
the new CIS rules the Contractor will be required to certify that
none of his Sub-contractors are, in reality, employees and thus
should be operating the PAYE system. Negligently failing to get
this vital decision right could mean paying up to £3,000
in penalties for each failure.
Contractors will know that, for cash flow purposes,
being able to receive their own payments without deduction of
tax at source is vital. But failure to comply with the administrative
requirements could seriously put that at risk. The new CIS rules
bring in a number of stricter compliance requirements. Get any
of these wrong and HMRC can immediately remove your “Gross
payments status”. These include :~
• Pay over your PAYE/C.I.S. deductions more than 14 days
late – even just once
• Failure to submit your Self Assessment Return
• Pay your Self Assessment tax more than 28 days late
• Submit your Sub-contractor’s Returns more than 28
days late – even just once
~ and you will lose your “Gross payments status”
and suffer tax deductions at source from all relevant receipts.
In addition, under the new CIS rules, you will not be able to
re-apply for “Gross status” for 12 months.
Each new sub-contractor you take on has to be verified
by you contacting H.M. Revenue & Customs.
Without doubt, failure to operate the system as
required could have a serious effect on your business.
Agreeing and minimising your CIS tax liabilities
with the tax authorities is principally achieved by completing
and filing the appropriate tax returns. Clients who are fearful
that their tax affairs may be enquired into, may wish to consider
taking out our
fee protection insurance before they submit these tax returns.
Dealing with a tax enquiry is both complicated and
worrying. Instruct our tax specialists, which include ex-Inspectors
of Taxes, to act in your best interests and put your mind at ease.
As well as explaining procedure and bringing matters to a close,
we shall also advise you on how to minimise your tax.
Practical Examples of our CIS Expertise
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- Administering the processing, paperwork and payments
side of CIS, through our outsourced
payroll service.
- Advising you on the contractual terms necessary with
your sub-contractors.
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