Working within the Construction Industry Scheme? Read our
helpful guide!
Nasa Consulting has produced this 'Guide to working within the
Construction Industry Scheme' to help you understand more about the
Construction Industry Scheme and how you can work within it in the
simplest way possible. If you are new to contracting, we have
included basic start up information to help you get underway, along
with options available to make your contracting life easier.
Working within the Construction Industry Scheme can be daunting
which is why we have produced this guide and we really hope that it
proves helpful to you.
If you require any additional advice or assistance with regards
to the Construction Industry Scheme or wish to discuss any of the
issues raised in this guide, please do not hesitate to contact us
on 0117 904 7755 or at info@nasaconsulting.com.
Introduction
Exactly what is required from you in order to work compliantly
with the least amount of fuss or hard work? Well, hopefully
this guide will answer that question. Working within the
Construction Industry doesn't have to be a headache however with
the government watching it with a beady eye ensuring that the
scheme is being ran efficiently, it is more important than ever to
ensure you are working compliantly and completing the right
paperwork.
Many Contractors have a care-free attitude and carry out their
tasks on a day to day basis without worrying about the Construction
Industry Scheme or ensuring they are completing the correct forms
and paperwork however, to be honest this attitude is irresponsible
as it doesn't take a lot of time or effort to learn about the
industry you are going to be working in and ensuring that you are
dealing with it properly. It will certainly save you time in
the long run as if you are faced with a tax investigation, and you
haven't been dealing with your affairs correctly, you could face a
drawn out, time consuming and very expensive problem on your
hands.
So, what exactly is the Construction Industry
Scheme?
The Construction Industry Scheme is a system introduced by the
government back in August 1999 and its objective is to ensure that
contractors working within the construction industry, quite simply,
pay tax legitimately.
The Construction Industry Scheme sets out the rules for how
payments to subcontractors for construction work must be dealt with
by contractors in the construction industry. You may think
that the scheme simply applies to those individuals involved in
mainstream construction work, but you would be wrong. Even if
a business doesn't do any building work, it may still be classed as
a mainstream contractor or be treated as a 'deemed contractor' by
HMRC (who will require it to register with CIS if it spends more
than an average of £1 million a year on construction operations
over a three year period. This sounds like a lot of money but
over three years, there are many types of businesses that fall into
this description).
HMRC define the rules of the scheme to generally include any
work that's done to a:
- permanent building
- temporary structure
- civil engineering work or installation
They also confirm some examples of the types of construction
work covered by the scheme. These include jobs like:
- site preparation
- general construction - bricklaying, roofing, plastering and so
on
- alterations and extensions
- repairs and refurbishment
- decorating
- dismantling work
- demolition
So in essence, if you are involved in any of the above, the
scheme applies to you.
Ok, so what do I need to do now?
If you haven't already, you need to register with HMRC.
You can do so by calling their helpline service on 0845 366
7899.
Register with HMRC without delay, as otherwise you could be
taxed at a higher rate than you should be. They will need to
know the name of your business, your own name (if you are trading
as a self-employed individual) and you will be issued with a unique
taxpayer reference number for the business which you need to retain
and keep safe. Any contractor you work for will need this
number in order to identify you on HMRC's system.
Subcontractors who are registered with a UTR number will be
taxed at 20% on all income at source. Those who do not have a
UTR will be taxed at 30%.
You may be eligible as a business for 'gross payment' status and
be issued with a subcontractor tax certificate which basically
means that deductions won't be made from your payments. In
order to qualify, you must be registered and then pass a series of
qualifying tests. For more information, you can visit HMRC's
website here http://www.hmrc.gov.uk/cis/subcontractors/advice-pay.htm
or you can call the helpline number above.
Employed or Self-Employed?
It is important to note that each contract should be looked at
independently to decide whether or not you are treated as employed
or self-employed. Your contractor should then operate the
necessary deductions. If you are considered employed for a
particular contract, your contractor should operate a PAYE scheme
whereby tax and national insurance contributions are deducted from
the payments made to you. It is important to undergo a status
test for each contract as if HMRC make a routine enquiry it could
develop into a status issue which you really don't want. If
you have dealt with your affairs correctly, and have perhaps taken
some professional advice, you can continue working with the
knowledge that you have done everything by the book!
Payroll Services and Umbrella Companies - What's all the
fuss about?
Payroll and umbrella companies are becoming more and more
popular in the Construction Industry these days. The
difference they make to your administrative burden and the pure
simplicity of the schemes can have a huge and extremely positive
impact on your working life. Nasa Consulting offers a
fantastic umbrella company solution and so that you can see what a
good umbrella company has to offer, we have provided details of our
outstanding package so that you can perhaps use it to compare the
market.
So, for just £9.99 per week we'll act as the subcontractor in
the relationship between you and your agency/client. We'll invoice
them based on your timesheet/hours that you provide and when we get
your money through, we deduct our service fee along with the 20%
CIS deduction, paying you the net amount and emailing you a
payslip. At Nasa, we process your payment with a 'same day
faster payment' so your money is in your account before close of
business that day!
Also, each month, we will complete the necessary CIS returns on
your behalf so HMRC are fully apprised of your CIS deductions.
So, if you are genuinely self-employed, and you can demonstrate
so by using HMRC's 'Employment Status Indicator' test, you can use
the Nasa CIS payroll service. If your status is that if an
employee, you will be able to use our standard umbrella company
service whereby you will become an employee of the umbrella company
and PAYE will be deducted from your earnings.
Many Contractors are now choosing these services as their
preferred choice of contracting within the construction industry
and it's understandable why. With such a high quality of
service for such a low fee, some consider it a 'no-brainer'!
Thanks but no thanks…
If you are contracting within the Construction Industry Scheme
and are not keen on joining an umbrella or payroll company, there
are several things you should be mindful of. They
include:
- Firstly, always ensure that you deal with each contract
individually and look at your self-employed/employed status each
time you start a new job. It is important that you are
dealing with your taxes correctly as HMRC are taking a strict
approach to workers in the CIS industry.
- Ensure that you manage and organise your business records
efficiently. This can be time consuming and laborious but you
need to get it right. Don't rush your paperwork - mistakes
cost money!
- Finally, you will need to prepare and submit your end of year
self-assessment tax return and calculate your tax liability (and
even refunds where necessary). You can obviously obtain
professional assistance with this and it would be advisable as this
really should be looked at and checked with scrutiny and filed on
time.
Self-Assessment Tax Returns in the CIS
industry
Dealing with your self-assessment tax return can be an extremely
stressful experience no matter how simple yours may be. You
have to consider the deadlines that are placed on tax returns and
if you submit yours late, penalties may be charged, which can be
very expensive. This can add even more pressure to you when
you're already perturbed about doing it. No one really enjoys
completing their tax return…do they?!
Important Deadlines for your Self-Assessment Tax
Return
Paper returns - 31st October
HMRC rules state that paper returns may only be submitted later
than the 31st October if:
- You receive the notice to file your tax return after the
31st July. In this case you'll have three months
from the date you receive the notice if you want to send in a paper
return.
- You're completing a paper return because there's no software
available to file your tax return online (for example Non-Resident
Companies) or you've been told by HMRC that you're not allowed to
file online. In these cases you have until the
31st January to send in your return.
Online returns - 31st January
The deadline is earlier if you owe less than £2000 and you want
HMRC to collect it by reducing your PAYE tax code next year.
In this case, you need to submit your tax return online by the
30th December instead. HMRC will try and amend
your code number however they do state that this isn't always
possible and you may have to make a payment instead by the
31st of January.
HMRC rules state that online returns may only be submitted later
than the 31st January if you have received the notice to
file your tax return after 31st October. You then
have three months from the date you receive the notice to send your
return online.
The dreaded penalties…
If, based on HMRC's deadlines above, they receive your return
after the filing deadlines you will automatically be charged a £100
penalty.
You can be excused from a penalty if you have what HMRC state as
a 'reasonable' excuse! There are no hard or fast rules on
this however they do state that the delay must have been caused by
an "exceptional or major unexpected event that was outside your
control".
(We are aware that the structure of penalties and how they work
are going to be adapted for the 2010-11 tax returns. This
will affect late returns from October 2011 onwards.)
Nasa Consulting - Useful Services
We have included below some services that you may find
beneficial. Please do contact us if you would like further
information about any of the services described.
- Self-employed payroll service - as commented on previously in
the guide, if you're CIS registered and self-employed, for just
£9.99 per week we can complete your 20% CIS deductions and returns
- what more could you want?
- Umbrella Company - as commented on previously in the guide, we
can take care of invoicing your agency/client, calculating your tax
and NIC, processing your expenses and arranging your agency
contracts -all for £9.99 per week.
- Contract and Working Practice Assessments/Status Checks - we
can assist you, when changing contracts in finding out whether or
not you should be classed as employed or self-employed
although HMRC also have a useful 'Employment Status
Indicator' test which can be used for free
http://www.hmrc.gov.uk/calcs/esi-01.htm.
- Self-Assessment tax return service - from just £99 plus
vat.
- Insurance - for an additional £3 per week (when taking out with
the payroll or umbrella service), we can provide full business
insurances should anything untoward happen while you are
contracting. You'll receive up to £10m Employers Liability,
£5m for Public/Products liability and £1m for Professional
Indemnity cover.
- Sole Trader Accountancy - if you would like assistance in
either setting up as a Sole Trader, or registering under CIS, or if
you're already registered and want help with the day to day tasks
such as Bookkeeping, Nasa CIS can help. We offer a range of
accounting services for Sole Traders.
Summary
We have provided a general overview of the Construction Industry
Scheme and matters that are likely to affect to you. If after
reading this guide, you have some further questions or you require
some advice or assistance with a particular CIS issue, please do
not hesitate to contact us on 0117 904 7755 or at info@nasaconsulting.com.