CIS and sub contracting

[lynsey91]

Can anyone help with clearing up my confusion with regard to paying a sub contractor under the CIS scheme please.

A couple of years ago my husband wanted to use a sub contractor to help him because he had a lot of work. He was told by an accountant that he would have to stop the subcontractor tax at 20% or 30% depending on whether the sub contractor was CIS registered or not. My husband is CIS registered and, at the time, was fitting kitchens and bathrooms as well as installing central heating. In the end he decided it would be too much aggravation so didn't employ anyone.

Last year he did a lot of work subcontracting to a company installing bathrooms, mainly for disabled. He worked for them for about 9 months and they never made any stoppages at all. He queried this with an accountant and was told the company were in the wrong and would possibly get into trouble and face a large fine. It seemed odd as the company have been trading for about 25 years and have a quite a few subcontractors.

In June this year he started sub contracting with an emergency plumbing service and they, again, have not made any stoppages. I find it difficult to believe that another established company either does not know the rules or is flouting them so can anyone let me know the true position

[nikkisizer]

Hello lynsey91,

The Subcontractor can apply to HMRC under the CIS for payments to be received gross without deduction of tax.

If this application is approved by HMRC the Contractor will not make tax deductions from the Subcontractor's payments.

[lynsey91]

My band has never applied to receive earnings without deduction. Every other company he has worked for has stopped him tax

[robbob]

CIS can be a minefield rule wise - there is a get out clause for certain types of work - eg minor plumbing or electrical work to building service systems is deemed to be outside the scope of CIS - this can mean that certain activities don't fall within CIS and other very similar activities do - certain firms may push the boundaries here more than others - its a risky area as not to apply CIS where it is due can be an hmrc penaltyfest extaordinaire.

Further details available here
http://www.hmrc.gov.uk/manuals/cisrmanual/CISR14090.htm


There are also exemptions for certain organisations where the main operations aren't strictly speaking construction industry - this may include arms length property management agencies perhaps.

I do have to admit though its not uncommon to come across companies where one scratches ones head as to why cis isn't being applied when it seems reasonably likely that it should be - as it's entirely the contractor's responsibility i wouldn't worry too much as a subcontractor whether tax should have been deducted other than possibly keep detailed info for as long as possible as there is always a small chance the contractor may come back at a much later date asking for a favour in the way of additional info or some offset request that may avoid them incurring double tax charge - hmrc aren't always that understanding when it comes no non CIS compliance or differences - which is a shame as its a pretty difficult area for small business to comply if they are legislation detail experts (presumably thats why they became a plumber rather than a tax expert) - it all seems a bit cruel at times for small bods trading below the vat threshold where they may need help on a job only 3 or 4 times a year- but rules is rules i guess.