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Why does everybody hate CIS? More importantly, can we make it easier? Subcontractors caught in the CIS scheme notoriously hate being in it, as it gives rise to late submissions and cashflow problems all too often. It always helps to start at the beginning... why is this the case? The Construction Industry Scheme is designed for contractors to withhold tax on payments made to subcontractors, due to tax being lost from under-declarations, or failure to notify. What HMRC created in the 1970's as a result, was a system through which subcontractors had to register with HMRC, or otherwise risk a bigger deduction that would squeeze cashflow. This led to contractors deducting either 30% from a subcontractor unverified with HMRC, or 20% if verified. Either way, both negatively impact cashflow for subcontractors. But, what if I was to tell you that there’s a way so no deductions are taken? A subcontractor can register for gross payments, but as with anything, HMRC have put conditions on this registration. The first - meeting the business test. This means doing construction in the UK, and running your business mainly via a bank, i.e. you cannot register if you primarily receive cash payments. The second - the turnover test. This is where construction turnover must be at least £30,000 in the past 12 months for a sole trader / director. The third and foremost - the compliance test. HMRC want to see if you as a subcontractor have kept your tax affairs up to date in the last 12 months. Minor failures are ignored, but if late submissions, late payments and tax arrears are a common theme, then you’re likely to be unsuccessful. If you look at why HMRC have imposed these conditions, it’s fairly obvious. If your business primarily deals with cash, HMRC have no way of verifying your data, and thus increases the risk of under declarations. If you have turnover of less than £30,000, there’s a risk of default by a subcontractor. If you cannot keep your tax affairs in order, HMRC would have a cashflow problem once more. The solution is simple. If you want to be in the best cashflow position whilst under the CIS, you need to apply for gross status, and to do so successfully, your financial and accounting affairs must be in check. If you have any questions, from reviewing submissions, to helping ensure you are complaint, please do reach out. #TaxAdvice #CIS #Subcontracor #Construction

CIS Compliance The Construction Industry Scheme (CIS) is a UK government initiative designed to regulate tax payments within the construction sector. If you are a limited company operating within CIS is critical to avoid penalties and ensure smooth business operations. Contractors and Subcontractors: Under CIS both contractors and subcontractors need to register with HMRC. Limited Company contractors: You are required to deduct tax from subcontractors payments under CIS. The amount deducted depends on the subcontractor’s CIS status. Key Compliance steps for CIS LTD: To comply with CIS as limited company you need to follow these steps Step 1 – Verify Subcontractors Step 2 – Make CIS Deductions Step 3 – File monthly CIS returns Step 4 – Pay HMRC Step 5 – Provide Subcontractor Payment Statements Step 6 – Keep detailed records

The Construction Industry Scheme (CIS) establishes specific rules for tax and National Insurance (NI) for professionals in the construction sector. 👷♂️ This applies to businesses classified as ‘contractors’ and ‘subcontractors,’ which can include companies, partnerships, or self-employed individuals. To learn more, please read our latest blog: https://lnkd.in/eytPRpf2

The Construction Industry Scheme (CIS) is a set of special rules for tax and National Insurance for those working in the construction industry. Businesses in the construction industry are known as 'contractors' and 'subcontractors' and should be aware of the tax implications of the scheme. Under the scheme, contractors are required to deduct money from a subcontractor’s payments and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and National Insurance. Contractors are defined as those who pay subcontractors for construction work or who spent more than £3m on construction a year in the 12 months since they made their first payment. A contractor can be a sole trader, in a partnership or own a limited company. New contractors must follow these rules: Find out more https://lnkd.in/dNvJYHBi

Great article David. HMRC are very active in delving into the validity of materials cost deductions on CIS invoices. If you have accepted the use of estimates, please ensure that you have obtained qualified advice (eg Quantity Surveyors) to independently verify that the CIS deductions are reasonable.

Navigating GST for Construction Businesses: A Financial Professional's Guide The construction industry is a complex landscape riddled with intricate regulations and tax implications. Keeping up with GST compliance can be overwhelming, particularly for financial professionals managing these accounts. Here's a key takeaway for financial professionals working in construction: Understanding the GST treatment of works contracts is crucial for accurate financial reporting and tax compliance. Here's what you need to know: Works contracts are treated as composite supplies under GST. This means the supply of services (construction) and goods (materials) are bundled together and taxed as a single supply. The principal supply determines the GST rate. In works contracts, the supply of services is usually the principal supply, leading to the application of the service tax rate. Input tax credit (ITC) is available on inputs used in works contracts. This includes materials, labor, and other services directly related to the project. However, ITC on certain expenses may be restricted. For example, ITC may not be available on expenses related to personal consumption, entertainment, and travel benefits provided to employees. Example: A construction company undertakes a building project. The company uses various materials and services, including labor, machinery, and transportation. The company can claim ITC on these inputs, but specific regulations apply to individual expenses. Call to action: Ensure you have a clear understanding of the specific GST provisions related to works contracts in your jurisdiction. Consult a tax expert if you have any doubts or face complex situations. GST #Construction #Finance #TaxCompliance #FinancialProfessionals

The ICAEW reports: "It is no longer possible for subcontractors under the construction industry scheme (CIS) to request payment deduction statements from HMRC’s CIS helpline. The request must be made by post. Under the CIS, a subcontractor receives a payment deduction statement from the contractor. The statement sets out the gross amount paid to the subcontractor and details of any tax deducted.  The subcontractor must retain the statement as proof of the amount deducted. If the subcontractor does not have all of their statements, they can ask their contractor for replacement copies.  It is also possible to request missing statements from HMRC. Previously, subcontractors could do this by calling HMRC’s CIS helpline. From 1 July 2024, HMRC only accepts requests made in writing. HMRC’s guidance explains what information to include in the request and where to send it. HMRC will aim to respond to the request within 15 working days. HMRC says it has made this change as part of ongoing efforts to improve processes and ensure taxpayers’ data remains secure. This information will be included in the next edition of Agent Update, which is expected to be published on 17 July 2024. "

If you are a sole trader, partnership or limited company and you intend to pay subcontractors for construction work, you must register as a contractor with the Construction Industry Scheme (CIS). When engaging subcontractors, you must ensure that they are self-employed and have also registered for the Construction Industry Scheme. Once this has been confirmed, through verification with HMRC, you can start paying your subcontractors and deducting tax at 20%. If they are unverified, you must deduct tax at the higher rate of 30%. These deductions count as advance payments towards your subcontractors’ tax and national insurance bills. Subcontractors who don’t want deductions made in advance must apply to HMRC for ‘gross payment status’. All payments made to subcontractors within each tax period must be reported to HMRC on a CIS return, by the 19th of the following month. If you haven’t paid any subcontractors in a given tax period, you must submit a nil return to avoid HMRC late fining penalties and estimated charges. For more information on CIS, please follow the link Construction Industry Scheme (CIS) - GOV.UK (www.gov.uk) #CIS #Swansea #AccountantsSwansea #LocalBusinessSwansea

Dive into the latest changes in the Construction Industry Scheme (CIS)! Learn about registering for gross payment status, upcoming compliance test tweaks, and more. Stay ahead with our comprehensive blog article. Click the link to read more: https://buff.ly/3uv2JK2 #ConstructionIndustry #TaxCompliance #CISUpdates 🏗️💼

The Construction Industry Scheme (CIS) is a set of special rules for tax and National Insurance for those working in the construction industry. Businesses in the construction industry are known as 'contractors' and 'subcontractors' and should be aware of the tax implications of the scheme. #ContractorsTax #CIS