We know CIS so you don’t have to
There is a special scheme for self-employed contractors and sub-contractors working in the construction industry called the Construction Industry Scheme (CIS).
Sovereign Plus has been working in the field of CIS for over 20 years and ensure all contracts with clients and subcontractors are legally robust and all tax on subcontractors’ payments is accounted to HMRC.
Who?
All construction operatives are required to be registered for CIS. Subcontractors are not legally required to sign up, but deductions from payments increase from 20% to 30% if not registered.
Why?
The scheme exists to prevent fraudulent employment and tax evasion. Under the scheme, contractors deduct money from payments made to subcontractors at a standard rate pf 20% and pay it directly to HMRC. These count as advance payments towards tax on behalf of the subbie.
Simple HMRC verification process to determine the status of subcontractors
We check all subbies to determine their status when they register.
- If they are ‘Gross’ no tax deduction is applied
- If they are CIS registered, a 20% deduction is applied
- If they are unregistered with CIS, a 30% deduction is applied – we will then ensure they register for CIS
Your CIS responsibilities to HMRC are to:
- Verify each sub-contractor with HMRC before you pat them, and Calculate and deduct CIS tax in accordance with the verification details
- Inform the sub-contractor the amount that they will be paid
- Submit your CIS300 report by the 17th of each month, detailing all payments made to, and deductions collected from sub-contractors
- You must submit a “nil return” even if no sub-contractors are paid
- Provide a payment statement to the sub-contractor at least monthly
Take the headache out of paying your self-employed subbies
Sovereign Plus will:
- Undertake a compliance check on every subbie prior to their start
- Check their Rights to Work
- Verify each subbie’s Self-Employed Status with HMRC
- Pay the right amount of tax for each subbie to HMRC on your behalf
- Provide every subbie with Personal Site Accident insurance and Product Liability insurance
- Carry out all administration, thus freeing up your time
- We allow you to continue engaging subcontractors on a continuous long term basis, without any risk of HMRC status investigation or an employment tribunal.
The Risk of CIS Penalties
The Construction Industry Scheme tax system is backed up by penalties
Penalties cover situations such as:
- Incorrect monthly returns submitted fraudulently or negligently
- Failure to provide CIS records for HMRC to inspect
- Incorrect declarations regarding employment status
£100 Fine – Failure to submit monthly return, (including a nil return) by the correct date.
Additional £200 Fine – If monthly return is still outstanding after two months.
Additional £300 Fine – If monthly return still outstanding after three months OR 5% of the CIS deductions from the return (whichever is higher), and additional increases for returns that remain outstanding at 6 and 12 months.
Loss of Gross Payment Status – Under the CIS scheme, HMRC is reviewing every firm’s status and payment history and estimate that 40% are failing the test.
HMRC can levy up to £3,000 per monthly return submitted if you incorrectly tick the self-employed status declaration when your sub-contractors should have been employed.
“By engaging Sovereign Plus, we reduce the chance for error and the associated costs and risks, by removing the vast majority of your CIS compliance responsibilities”
David Jenkins – Managing Director