ARE YOU READY FOR THE NEW CONSTRUCTION INDUSTRY SCHEME (CIS)?

If your company employs the services of sub-contractors and you are not aware of the new rules then we would strongly suggest you read on as failure to comply with the new rules will lead to ongoing fines being assessed on your company.

If you have paid sub-contractors under the old CIS rules within the past two years you should have received a form CIS333 from HM Revenue & Customs (HMRC). You must keep this form safe, if you are to reduce the administrative burden and the potential fines which could be assessed on your company under the new rules.

Did you know under the new CIS rules: -

• There will be no need to view CIS certificates or cards
  You will need to verify each and every sub-contractor direct with HMRC, either by phone or online and keep a record of the authorisation code obtained from HMRC.
  
  Will you have the time to ring HMRC or log onto their website in order to verify every new sub-contractor before you can make payment to them?
  
  
• You now need to complete monthly CIS returns to be submitted to HMRC
  Under the old rules you were only required to submit annual returns for CIS to HMRC. The new monthly returns require details of all sub-contractors you have paid in the month, including names, national insurance numbers, amounts paid and any tax deducted from such payments.
  
  WARNING: Even if you have not made any payments in the month you will still need to submit a Nil return to avoid late penalties – will you remember to do this?
  
  Please note you will still need to complete the annual return for the tax year ended 5 April 2007 as the new rules commenced 6 April 2007.
  
  
• You now need to declare that you confirm all sub-contractors are not employees of the company
  Every month you will need to sign a declaration stating that you have considered the status of all sub-contractors and confirm that they should not be employees. HMRC have stated that the penalty for false declarations could be as much as £3,000 per false return. Given that these are monthly returns you cannot afford to get them wrong!
  
  Are you aware of the guidance published by HMRC to help you determine whether someone is an employee? Remember even if someone tells you that they are self-employed the onus is on the company to determine this status correctly. WARNING: In the event of an investigation by HMRC, companies will be expected to cover the PAYE and National Insurance liabilities for any sub-contractors who they believe should have been an employee.
  
  
• There is now be a third type of sub-contractor
  Under the old CIS rules you pay sub-contractors gross of tax or net of 18% tax, depending upon the paperwork they hold. Under the new CIS rules there is now a third category for those individuals who have not registered as self-employed with HMRC. Previously these individuals would not have been paid within CIS. You will now be required to deduct tax from these individuals but at a higher rate of 30% compared to sub-contractors registered for net payment with HMRC, who incidentally will now be subject to a deduction of 20% tax, instead of the previous 18%.
  
  Do you have systems in place that work out which category a sub-contractor fits and how much tax to deduct?
  
  
• Standard CIS 24 & 25 vouchers will no longer be available
  Under the new scheme you are expected to provide a payslip to each sub-contractor showing the separate gross payment for labour and for the cost of materials less any tax deduction, if applicable.
  
  Do you have the systems and stationery available to do this?
  
  
• HMRC recommend all CIS returns are prepared and submitted online
  The new CIS system has been set up to allow the completion of manual returns as well as computer generated returns. However HMRC have set very stringent rules on the preparation of these returns as they will need to be machine read once they are received by HMRC. This means that any mistakes or damage to the return will make it invalid and you will be requested to prepare the return again. To avoid this the best option must be to file returns online.
  
  Do you have the time to prepare and submit these returns online every month?

You should by now realise that the administrative burden on your company since 6 April 2007 has increased, if not, you probably will in the coming months and so once again we refer to our early question “Are you ready ?”, If the answer is “NO” then we have the SOLUTION.

To assist our clients, who act as contractors (and sub-contractors), we are providing a bureau service where we will: -

• Collate information on all sub-contractors on their behalf;
  
• Obtain direct confirmation from HMRC whether to deduct tax and at what rate on an individual sub-contractor basis;
  
• Prepare the monthly returns, obtain your approval and submit the forms to HMRC online on your behalf;
  
• Apply the correct deductions of tax, as determined by the sub-contractors HMRC classification, issue payslips to all sub-contractors and determine the amount of CIS tax to be paid to HMRC by the 19th of every month;
  
• Above all else take away the burden of the new CIS rules, allowing you to concentrate on more important business issues within your company.

If you are interested in this service or would like to discuss the new CIS rules further, why not contact us to arrange a FREE no obligation consultation.