HM Revenue & Customs implemented the current generation of the Construction Industry Scheme (CIS) tax rules in 2007. One of the key objectives of these new rules was to force all builders 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 by the 31 January deadline
- 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 CIS 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 submitting the appropriate tax returns. Clients who are fearful that their tax affairs may be enquired into, may wish to consider taking out our tax investigation insurance before they submit these tax returns.
Dealing with a tax enquiry is both complicated and worrying. Instruct our tax specialists, 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.