We verify all 5 subcontractors and give the contractor the single verification reference V to cover all of them. We give the contractor the single verification reference V for the 4 subcontractors who we could verify. Contractors must make a note of the reference numbers given and must enter them on their monthly return alongside the entries for each subcontractor from whom deductions at the higher rate have been made.
The subcontractor will need this reference number later when seeking credit for any of the deductions made. When a contractor has verified a subcontractor, or made a payment to the subcontractor if verification was not necessary, the contractor should continue to pay the subcontractor in the same way until we tell them about any change.
Payments they make to the subcontractor after the notified date of change must be made under deduction. Deductions must only be made from that part of the payment that does not represent the cost of materials incurred by the subcontractor. Any travelling expenses including fuel costs and subsistence paid to or on behalf of the subcontractor must be included in the gross amount of payment and the amount from which the deduction is made.
Step 1: Work out the gross amount from which a deduction will be made by excluding VAT charged by the subcontractor if the subcontractor is registered for VAT, read the examples in Appendix D. The contractor will need to keep a record of the gross payment amounts so that they can enter these on their monthly returns.
Step 2: Deduct from the gross payment the amount the subcontractor actually paid for the following items used in the construction operations, including VAT paid if the subcontractor is not registered for VAT:. If the subcontractor fails to give this information, the contractor must make a fair estimate of the actual cost of materials. The contractor must always check, that the part of the payment for materials supplied is not overstated.
If the materials element looks to be excessive we may seek to recover any under deduction from the contractor. On making a contract payment to a sub-contractor, it is only where a sub-contractor directly pays for the materials purchased to fulfil a particular construction contract, that the cost in question may be deducted from the total sum of the contract payment before the CIS deduction. This means only the subcontractor directly purchasing materials is entitled to a deduction for those materials.
Examples of how to calculate the deduction are shown in Appendix D. Where the subcontractor hires plant in order to carry out construction work, the cost of the plant hire and any consumable items such as fuel needed for its operation may be treated as materials for the purposes of calculating any deduction. This treatment only extends to plant and equipment actually hired by the subcontractor from a third party. If the subcontractor owns the plant used in executing the work no notional deduction for plant hire may be made, although consumable items such as fuel used by the plant may still be treated as materials.
The contractor should check this with the subcontractor before making payment as failure to do so may leave the contractor responsible for any under deduction. The contractor must provide a written statement to every subcontractor from whom a deduction has been made within 14 days of the end of each tax month.
A tax month runs from the sixth of one month to the fifth of the next month so the statement must be provided by the 19th of the month. The statement can be issued on the basis of one for each tax month or one for each payment if this is more frequent. There may be other information that a contractor may want to put on the statement to enable the subcontractor to understand the payment that has been made.
For example, this may include the amount of VAT charged by the subcontractor. If a contractor regularly fails to give a payment and deduction statement where a statement is required to be given, this may be taken into account when considering whether or not the contractor should retain gross payment status as a subcontractor. The contractor should normally make payments under deduction to the subcontractor, but the subcontractor may authorise payment to be made out to another person, such as a debt factor.
The statement must still be made out in the name of the subcontractor and issued to the subcontractor so they receive credit for any deduction. Read paragraphs 6. This section explains what we require from contractors under the scheme. Each month, contractors must send HMRC a complete return of all payments made to all subcontractors within the scheme in the preceding tax month.
This is regardless of whether the subcontractors were paid:. A return of all payments made to subcontractors between 6 May and 5 June must be sent in sufficient time to reach us by 19 June. Please be aware that using the 2 ways above at the same time may cause returns to be overwritten. Sometimes, contractors may include on the monthly return payments to subcontractors that are not within the scheme.
However, when paying subcontractors under deduction, contractors should ensure that deductions are not made from payments to subcontractors for contracts that are wholly outside the scope of the scheme. If a contractor fails to tell us by the 19th of the month that no return is due we may issue a penalty. If the situation changes during that time, the contractor must let us know. The principle for the monthly return is that it should reflect what the contractor has actually paid and deducted in the month it covers.
HMRC recognises, however, that contractors will sometimes make mistakes on their monthly returns. The following paragraphs, explain how and when a return needs to be amended, assuming that the relevant monthly return has already been submitted to us. A contractor might omit details of a payment to a subcontractor or might make a mistake in entering details of the payment or deduction onto the return. To correct this type of error, contractors should phone us giving full details of the errors and the correct figures.
Underpayments of this type can usually be put right by a further, balancing payment. The total of payments made and any deductions should then be correct, overall. How that is then corrected for CIS will depend on the approach that the contractor adopts.
If the subcontractor is paid under deduction, the same principle will apply. The payment statements provided to the subcontractor each month would also reflect those figures. The revised payment and any deductions should be recorded on the next monthly return. Where the cheque has been cashed and any deductions have been paid over to us, the contractor will be seeking the excess payment from the subcontractor.
Although the monthly return in this case will be correct, as it reflects what was actually paid in the month, the contractor should phone us to report the error and to advise us of the correct payments due to the subcontractor.
If you need to inform us about an incorrect return, contact the CIS Helpline. Contractors that need to make corrections to returns, as described in the previous paragraphs, are able to make those corrections online. How they do this depends on whether they use:. If the contractor uses the HMRC CIS online service to file returns, this same service may be used to amend any returns sent to us since 5 February To amend a return for a month earlier than the return for 5 February , contractors must contact the CIS Helpline.
Contractors using third party software to file their returns may be able to make amendments online depending on the implementation of such a feature within the software they are using. Contractors who need to make amendments to their returns but cannot yet do this online because their software supplier has not yet made the facility available should phone us with full details of which monthly return s they need to amend.
Contact the CIS Helpline. When making corrections over the phone, the contractor should make a note of the date and time of the call and nature of the changes. This is in case the contractor needs to make any subsequent enquiries about the changes.
If you need to inform us about an amended return and are unable to do this online, contact the CIS Helpline. Contractors must pay the amount deductible from payments to subcontractors to our accounts office monthly. They must pay deductions due to be made in each tax month within 14 days of the end of that month or within 17 days where payment is made electronically, whether or not these deductions have actually been made.
Contractors may also have to pay penalties if they do not pay the amounts due on time and in full. Deductions made between 6 May and 5 June must be paid by 19 June, or by 22 June where payment is made electronically or the previous banking day where the 22nd is a weekend or bank holiday. The quarters end on 5 July, 5 October, 5 January and 5 April and payments are due within 14 days of the end of each quarter or 17 days if the contractor pays electronically.
Even where payments are made on a quarterly basis, contractors must still send returns monthly see paragraph 4. Companies that have deductions taken from their income as subcontractors should set-off these deductions against the amounts payable monthly or quarterly for PAYE , National Insurance contributions and Student Loan repayments due from their employees and CIS deductions from their subcontractors.
Companies should simply reduce the amount of PAYE , National Insurance contributions, Student Loan repayments and any scheme deductions they pay over to our accounts office by the amount of CIS deductions made from their income.
Contractors must keep a record of the amounts set-off so they can complete their end-of-year returns. From 6 April we do not charge contractors a penalty in respect of any months for which a return is not due for the month. However, if a contractor does not tell us that a return is not due for the month, a penalty may be issued.
If a contractor submits a monthly return that is incomplete or incorrect, we may charge penalties where we believe the error or omission has been caused by negligence or intent on the part of the contractor. If things go wrong when a contractor applies deductions, the contractor may need to satisfy us that every reasonable care was taken to follow the rules of the scheme and that either:.
If we refuse to waive payment of the deductions that should have been made, the contractor has the right of appeal against that decision. Where we cannot agree whether or not a deduction should have been made, we may make an assessment of the amount we believe should have been deducted. The contractor has a right of appeal against our assessment.
The subcontractor will be able to ask HMRC to review the decision and where they are not satisfied with the outcome the subcontractor can appeal to the tax tribunal. It does not matter where payment is actually made - if the construction work is carried out in the UK then the scheme applies to that payment. There is no difference between the treatment of UK contractors and subcontractors and non-resident contractors and subcontractors.
Otherwise, your contractor will have to make deductions at the higher rate from your payments. Companies must register with the Specialist Personal Tax office if they are:. The Specialist Personal Tax office provides advice about how the Construction Industry Scheme applies to non-resident companies and the registration process. If you stop trading as a CIS registered contractor, you may need to:. If your business is trading, dealing in or developing land in the UK, the profits are taxed in the UK.
A building site or construction or installation project is a permanent establishment. However, under many Double Taxation Agreements DTAs it is not treated as one if it does not last longer than a stated period - usually between 3 and 24 months.
Check the agreement for your country of residence to see what, if any, the period is. You must still register and operate the scheme as normal. Generally, if you are an individual or partner in a firm, any deductions made by contractors from the amounts they pay you are allowable against your UK tax liability.
However, there may be times when you make little or no profit in the tax year, and the deductions exceed your liability. When this happens, you can claim a repayment of the excess deductions from us. If you do not register as a subcontractor when you should do, your contractor is obliged to make deductions at a higher rate from any payments made to you. If a contractor and a subcontractor cannot agree about a deduction, either of them may ask us for a ruling.
If they still cannot reach an agreement after the ruling, either the contractor or the subcontractor may ask us to bring the matter before the independent tax tribunal for a decision. If agreement cannot be reached quickly because of the dispute, the contractor must make the appropriate deduction and pay it to our accounts office.
Many businesses, whether sole traders, partnerships or companies, conduct all, or part, of their business using one, or sometimes more, trading names. However, a trading name has no legal status of its own and is simply a brand name for the underlying legal entity.
When registering for CIS , subcontractors will need to provide us with their legal name but they can also give us one trading name, if they wish. When the subcontractor subsequently enters into a contract with a contractor, they should give the contractor details of their legal name, as registered on our computer system, together with their UTR , and National Insurance number, or company registration number when they are a company.
Without this information, we may be unable to identify the subcontractor when the contractor attempts to verify them. For payment to be made gross to the nominee, both the subcontractor and the nominee must be registered for gross payment. If the subcontractor is not registered for gross payment, payment under deduction must be made to the nominee using the rate applicable to the subcontractor. This means that if the subcontractor is registered for payment under deduction, the standard rate of deduction must be applied to the payment being made to the nominee.
The contractor must still make out a payment and deduction statement in the name of the subcontractor and issue it to the subcontractor.
If a subcontractor assigns their right to receive payment to a debt factor, then, the contractor can make the payment as if it were being made direct to the subcontractor. Where a subcontractor has died, any payments to their personal representatives should be made on the same basis as payments were made to the deceased immediately before their death.
If a contractor dies, the responsibility for the running of the scheme falls to their personal representatives. The responsibilities include paying over deductions and sending in the monthly returns. If a business previously run by an individual is taken over by a partnership or company, the old scheme registration cannot be used for the new business. The new business must register for the scheme and get gross payment status before it can be paid without deductions being made.
Similarly, if an individual takes over as sole proprietor of a business having previously been a partner or director of that business, they must apply again for gross payment status as the previous status of the partner or director will no longer be valid.
When a contractor takes over another business as a going concern, the contractor may request authorisation to treat certain subcontractor verifications made by the previous business as if they had been made by the new business.
Normally, this will apply in respect of any subcontractors who are working on ongoing contracts at the time of the transfer of the business. This will avoid the need for the contractor to have to verify several subcontractors after the acquisition of the business. To request authorisation in these circumstances, contact the CIS Helpline. We will need the following details for both the new contractor and the former contractor business:.
A close company is basically a company that is under the control of 5 or fewer persons. If a close company holds gross payment status and there is a change of control - through a transfer or issue of shares in the company - the company must notify us of the names and addresses of the new shareholders within 30 days. Companies that fail to do this may have their gross payment status withdrawn.
Under the scheme, a contra does not reduce the payment from which the deduction may have to be made and is a payment by the contractor to the subcontractor. A set-off is money not paid to a subcontractor by a contractor who believes there has been a breach of contract. Under the scheme, a set-off does reduce the payment from which the deduction may have to be made and so is not a payment by the contractor to the subcontractor. Subcontractors may invite contractors to pay them by debit, credit or other type of purchase card in order to obtain payment under the contract.
Although there is no particular reason why cards cannot be used to make payments to subcontractors paid under deduction, doing so would lead to a number of problems. These include the timing of the payment of the amount deducted, the recording of the payment and deduction on the relevant monthly return and the issue of the deduction statement to the subcontractor. We therefore recommend that contractors should restrict the use of payment cards to those subcontractors paid without deduction or to cover only the cost of materials.
Some contracts allow the contractor to retain a percentage of the contract price for a period after the construction work has been completed. There are no special rules for retention payments and they are treated the same way as any other payments. At the time of payment of the retention, the contractor must decide whether they must verify the subcontractor in accordance with paragraphs 3. An example of an inducement is payment of all or part of the costs of fitting out the property.
Such inducements are excluded from the scheme. The Private Finance Initiative PFI is a form of Public Private Partnership, aimed at enabling the public and private sectors to work more closely together by making use of private capital and expertise in the provision of public sector infrastructure and services. RTI uses cookies to offer you the best experience online. If you would like to know more about how RTI uses cookies and how to manage them please view our Privacy Policy here.
Chen, L. Single nucleotide polymorphisms affect both cis- and trans-eQTLs. Assuming I am affected, is it likely that my accountant I use one of the main contractor accountants will handle the obligations under RTI for me? If not, perhaps I should have never got rid of my umbrella company, as presumably the umbrella company would have to deal with the RTI requirements?
So any salary that you receive is through PAYE as an employee of the company which therefore means that you fall within the scope for RTI.
RTI will see the introduction of the returns being submitted on a monthly basis as part of the payroll process rather than at the end of the year. This is not an entirely new system as monthly reporting has been in place within the construction industry scheme for some time known as the Construction Industry Scheme - CIS.
RTI will also override the need for submitting separate starter P45 and leaver forms P The records that HMRC hold will be based on up-to-date information rather than only having available information from a previous tax year. This will mean that HMRC will be able to review whether an individual is being correctly taxed and make any necessary amendments to tax codes a lot quicker than with the current system.
This in turn will ensure that more employees will pay the correct amount of tax and NI in the tax year. This new system is still being trialled by a selection of employers and HMRC.
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