Bloggs and co are registered under CIS scheme but mainly work for householders. They are having trouble understanding why they should deduct tax via CIS from the very occasional subcontractor. They do operate the scheme for a regular subbie, but have it in their head that this is somehow a special case.
I am being rather heavy about this and need to spell out the penalties. I have already told them that their own CIS status could be changed to gross if they don't use CIS for all subbies - even if we are talking an extra one a year. Can you clarify what the other penalties would be? I assume the returns would be incorrect by not including all subbies who should have had a deduction. So would that be £3,000 for each return that wasn't incomplete? Lay it on thick, please!
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I don't understand
If they fail to operate CIS for all their subbies, they might eventually lose their gross sub-contractor status, if they have it, not be put onto it, for when they work for contractors in the industry. However, as they work mainly for householders, this might not be much of a problem.
They might be well advised to consider if their "regular subbie" is in fact an employee who should be taxable and NICable under PAYE.
Any monthly CIS return which fails to disclose a payment to any subbie, even one with gross status, is wrong. If they are operating CIS correctly in respect of one subbie, they would not have a leg to stand on if they fail to apply CIS to every other subbie.
Are they getting confused by the fact that householders are exempted from being treated as contractors under CIS and hence, that their sales to householders are not subject to CIS? This exemption does not extend to subbies engaged on the work for the householders.