Who pays CIS tax?

If you are a subcontractor working for a contractor under the Construction Industry Scheme, there are things you can do to ensure you are paid correctly, with the correct amount of CIS tax deducted. Under the Construction Industry scheme, contractors have to verify subcontractors with HM Revenue & Customs who will provide the payment status of the subcontractor and inform the contractor how to make payments.

If you are not registered under the Construction Industry Scheme and intend to carry out work for a contractor, you need to register as soon as possible. Although information provided will depend on whether you are a sole trader, company or a partnership, the information generally required includes the business name and address along with other business details like the Unique Taxpayer Reference number. The contractor will also require this information, which they will compare with the information you have provided for HMRC. Not registering with the Construction Industry Scheme or not providing the correct details for your business could mean that the contractor is unable to verify you and you will pay a higher rate of CIS tax.

There are two ways to pay a subcontractor through the Construction Industry Scheme; either gross or with tax deducted. If you are paid a gross amount, you will be liable to pay income tax and National Insurance on the amount paid, through completion of your self assessment tax return. If you are paid under deduction, the contractor will deduct tax at the appropriate rate, which is currently 20 per cent, and they will pay this amount and declare it on the monthly CIS return. When you complete your self assessment tax return for that year, income and National Insurance will be calculated by HMRC but any CIS tax deducted will be taken into account and set off against the amount you owe. If the contractor is unable to verify you with HMRC or you aren?t registered under the Construction Industry Scheme, you will have tax deducted at the higher rate of 30 per cent.

To receive gross payments under the Construction Industry Scheme, a subcontractor must fulfil specified criteria set out by HMRC. You must carry out construction work in the UK and be run mostly through a bank account. In addition, your annual turnover for construction work, not including material costs or VAT, must be at least ?30,000, although some companies and partnerships will be expected to have a higher turnover. You must be compliant with HMRC, fulfilling all obligations. HMRC will carry out checks to ensure you meet the criteria before permitting you to be paid gross. HMRC will check that all self assessment tax returns have been submitted in a timely manner and all due tax paid on time, as part of the compliance checks carried out. However, HMRC will provide some lenience and will ignore the occasional late filing. If HMRC agrees that you can be paid gross, you may undergo a Tax Treatment Qualification Test, which is also recognised as a scheduled review.

If you are to be paid by the contractor under deduction, you will pay tax and National Insurance will be stopped at a rate of 20 per cent, unless you aren?t verified or not registered with the Construction Industry Scheme, in which case it will be 30 per cent. Specified costs and VAT will be deducted from pay before any tax and National Insurance are deducted. The contractor is obliged to provide monthly statements of pay and deductions, which you should keep as proof of earnings and deductions. Any overpayment or underpayment of tax will be calculated when you complete and submit your self assessment tax return.

Disclaimer: The information contained in these articles is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

Source: http://www.theaccountancy.co.uk/articles/who-pays-cis-tax-1034.html

felicia day nfl 2012 draft st louis rams miami dolphins buffalo bills pittsburgh steelers seattle seahawks