The Construction Industry Scheme has a very simple goal \u2013 to prevent self-employed subcontractors from avoiding tax. The so-called \u2018Self-Employment Switch\u2019 has helped construction firms take on full-time employees as self-employed subcontractors. The contractor avoids paying the tax and employee benefits and the subcontractor who likewise doesn\u2019t need to tell the exchequer about their earnings. The CIS scheme was designed to thwart this behaviour within the UK\u2019s growing construction industry.<\/p>\n
The Construction Industry Scheme allows contractors to deduct money from a subcontractor\u2019s payment to directly pass it to HM Revenue & Customs. The Government is clear about the purposes behind this scheme:<\/p>\n
\u2018\u2019The deductions count as advance payments towards the subcontractor\u2019s tax and National Insurance. Contractors must register for the scheme. If you are not registered, as a Subcontractor, you\u2019ll see a high-rate deduction from your pay.\u2019\u2019<\/p>\n
Registration<\/u><\/p>\n
Before a contractor can qualify to pay any sub-contractor, they must first register with HMRC. An online service exists for this purpose and the process of registration takes approximately 2 weeks.\u00a0 Even after registration, a contractor must still ensure the following before they can make any payment to a sub-contractor.<\/p>\n
If the particular sub-contractor in question is an employee of any organization, then the CIS scheme rules don\u2019t apply to them and they\u2019re paid via their payroll under PAYE regulations.<\/p>\n
At the end of the year any tax deducted is taken off of any liability owed. If you have had more deducted than you owe \u2013 you get a refund!<\/p>\n
What happens if you fail to pay?<\/u><\/p>\n
As the contractor, it\u2019s your responsibility to deduct the right amount of tax from your subcontractors and if you fail to correctly notify HMRC of your subcontractor payments then you may be faced with a fine of up to \u00a33,000.<\/p>\n
Returns must be made by the 19th of each month for the previous tax month – so May\u2019s returns must be made by 19th June. Late returns will incur penalties starting from \u00a3100 for one missed day.<\/p>\n
Is there an easy way to eliminate all of this?<\/u><\/p>\n
Yes. Here at Outsourced ACC we are happy to do the work for you.<\/p>\n
We carry out all the administration to make sure you\u2019re fully compliant with HMRC and won\u2019t come unstuck.\u00a0 We make sure that the status of every sub-contractor is correct and pay the correct tax to HMRC on your behalf.<\/p>\n
Outsourced ACC clients cut out the administrative burden of CIS \u2013 along with all the risks.<\/p>\n
Written by Irina Stucere<\/p>\n","protected":false},"excerpt":{"rendered":"
The Construction Industry Scheme has a very simple goal \u2013 to prevent self-employed subcontractors from avoiding tax. The so-called \u2018Self-Employment Switch\u2019 has helped construction firms take on full-time employees as self-employed subcontractors. The contractor avoids paying the tax and employee benefits and the subcontractor who likewise doesn\u2019t need to tell the exchequer about their earnings. […]<\/p>\n","protected":false},"author":12312400,"featured_media":25325,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[19],"tags":[200,198,199,153],"_links":{"self":[{"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/posts\/25324"}],"collection":[{"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/users\/12312400"}],"replies":[{"embeddable":true,"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/comments?post=25324"}],"version-history":[{"count":0,"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/posts\/25324\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/media\/25325"}],"wp:attachment":[{"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/media?parent=25324"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/categories?post=25324"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/tags?post=25324"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}