Accounting for CIS

CIS Compliance:

Smaller construction firms often operate with a workforce composed entirely of self-employed sub-contractors who are paid under CIS.

Having provided extensive accounting and tax advice to many different building firms for the last 15 years, we have a good understanding of the challenges and problems that can arise in this arena.

We currently advise, prepare and submit monthly CIS returns for many construction sector clients.

Your Next Step: Call 01202 474545 to explore how we can help you comply with CIS.

When CIS rules apply, and don't apply, in construction and property refurbishment activities

One of the most frequent inquiries we receive from clients is when they need to apply the CIS rules to a job performed by an external contractor. It is just as important to know when to account for CIS, as it is to understand when CIS cannot be applied. We have published a non-exhaustive list of typical CIS-relevant activities to help our clients comply with the rules.

Determining if the work a construction contractor undertakes falls within the scope of CIS is a fundamental part of deciding if the domestic reverse account for VAT rules apply.

CIS and employment status conflicts

To help you make sense of a very confusing and contentious area of tax law, we publish below a general guide to deciding a contractor's employment status. We cannot understate the importance of only ever paying a contractor under CIS when you are certain the HMRC will view them as self-employed, and not a disguised employee who should be paid under PAYE. We stress it is only the HMRC's opinion on employment status that matters because they are the enforcing agency that will raise a large back-duty tax assessment if you get it wrong. You can download a PDF version.

flowchart to determine worker employment status under CIS rules

You will find no shortage of contradictory, uninformed, and misleading advice on the Internet that essentially suggests the HMRC does not strictly enforce compliance with the CIS rules and employment status. We know this to be incorrect. Whenever we are challenged for strictly adhering to the rules set out in the CIS tax regulations, we think of the many reported destructive and often irrecoverable outcomes from HMRC investigations that decides against the CIS tax treatment applied by the taxpayer. Making such mistakes often results in the firm under investigation being forced into insolvency because they cannot afford to settle the resulting back-duty tax assessment.

Contact us for advice before engaging a contractor if you have concerns their self-employed status may be compromised by the proposed working arrangement.

Adding the need to consider 'Worker' status in who works for your organisation

If it is not hard enough to decide whether an individual working for you is self-employed or employed … there is a third status you must now consider, namely that of being a worker. Lean more.