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Where Taxpayers and Advisers Meet
CIS: Good Friday 2007 payments
02/03/2007, by Sarah Laing, Tax News - Business Tax
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HMRC have published guidance on the operation of the Construction Industry Scheme (CIS) where a payment falls due on Good Friday, 6 April 2007 and a contractor is proposing to make the payment before that date.

In particular, HMRC have confirmed that the recently published guidance on the operation of PAYE & Class 1 NICs (see Related News below) does not apply to the CIS.

Unlike payments to employees under PAYE, CIS has no set paydays. Under the current scheme, a voucher,  (or, from 2007/08, an entry on a return)  is required reflecting the date of the payment. For the coming April, there is even greater significance, because if the payment is made on 5 April then a voucher is required, but if it is made on 6 April then the payment must be reported on the first new CIS monthly return.

The end of the tax year is not such an issue for sub-contractors because it is not necessarily their end of year in the way it is for employees (hence the PAYE guidance). Although HMRC can see that some contractors might face difficulties with some computerised accounting systems, they do not believe that a similar approach to that for PAYE & Class 1 NICs is needed.

If a contractor was to treat a payment on 5 April as being made on 6 April and included it on the first new CIS return, they would face one of two problems:

  • If the contractor deducts 20% from the payment, they would have no statutory right to do this and HMRC cannot give them cover by concession. Furthermore, the sub-contractor would be legally entitled to ask for the other 2%.
  • If the contractor deducts 18% from the payment, then the monthly return will show that they have under-deducted for that month.

On balance, HMRC consider that the statutory position is that the payment is effective on the date it is made and any solution needs to be a "business work-around".

Related news

HMRC provide guidance on Good Friday 2007 PAYE procedures

Link

HMRC: CIS - Good Friday 2007

About The Author

Sarah Laing
Editor, TaxationWeb News

Sarah is a Chartered Tax Adviser. She has been writing professionally since joining CCH Editions in 1998 as a Senior Technical Editor, contributing to a range of highly regarded publications including the British Tax Reporter, Taxes - The Weekly Tax News, the Red & Green legislation volumes, Hardman's, International Tax Agreements and many others. She became Publishing Manager for the tax and accounting portfolio in 2001 and later went on to help run CCH Seminars (including ABG Courses and Conferences).

Sarah originally worked for the Inland Revenue in Newbury and Swindon Tax Offices, before moving out into practice in 1991. She has worked for both small and Big 5 firms. She now works as a freelance author providing technical writing services for the tax and accountancy profession.

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