Property development and CIS

I am starting up as a property developer and CIS rules are not clear

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Good evening

I am about to purchase a property which I plan on undertaking a full refurb (basically it’s decorated to 1970's standard and want to modernise).  The plan is to do this up, sell on and buy a further property and start all over.

I will be trading as a sole trader to begin with (I have no other income as I left my previous job in March to undertake this new career change).  I have a few queries I wonder if anyone would be able to assist on.

1)  I understand that I will need to register with HMRC as a contractor for CIS. However does this mean that every person that works on the project will themselves need to be registered? The builder who will be ripping out the interior and putting in the new updated kitchen/bathroom etc is registered with CIS. However the reason I ask because I know a number of painter and decorators and they have never heard of CIS.  If I was to ask one of them to redecorate once the new kitchen/carpets/bathroom/doors etc have been replaced, do I need to ask them to set them selves up or can they simply invoice me  and I just pay them normally?

2)  I am out of the country a lot so I have asked a friend to undertake the project management (given he has contacts for the different services that I will need to employ such as electrician/plumber and is able to source materials at a decent cost given his background a number of years ago when he worked for the local council repairing council houses) and to ensure that everything is done on time.  He works for the Council 3 days a week and is not CIS registered but we have agreed that I will pay him a certain amount. Again do I need to ask him to register or can I pay him normally, i.e he invoices me and I pay him and he declares the amount on his tax return?

I am not 100% certain on these and therefore some guidance would be appreciated.  I know a lot of "odd job men" who do small work probably are not registered for CIS so if I have to ignore these then I will do, however would be good to know from the start as I want to ensure I comply with HMRC given the penalties they impose.

Many thanks in advance.

Andrew

Replies (3)

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By Matrix
22nd Jun 2017 21:16

They probably only take cash.

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paddle steamer
By DJKL
22nd Jun 2017 21:23

The starting point is because of the nature of your proposed main activity, purchase, refurbish, sell you are likely a contractor.

Consequent to this anyone providing construction services to you on a self employed/company/partnership basis is your sub contractor. You therefore need to be clear what are defined as construction services, see App B

https://www.gov.uk/government/publications/construction-industry-scheme-...

Your project/site manager, providing he is not providing construction services either directly or via his own sub contractors, will likely not fall within the sub contractor definition but devil is in detail; beware that he might still be considered your employee-a worse outcome, so scope of what he does, his standing as a project manager etc is important, I would want to know a lot more about his terms of engagement/scope of work / contract/liability etc to decide

To be clear generally architects/surveyors/professionals offering their services are not providing construction services, but do take care.

Re your decorators they may usually just work for individuals or BTL investors who are possibly nor required to register for CIS, then again they may only work in the shady parts of the industry.

One thing to be aware about, if you have multiple subs on site and something happens who is responsible, how is your PI insurance dealing with the gaps? The last thing you want is one party say erecting the scaffold and another falling out of it because safety aspects were missed, who is doing your site safety, method statements, etc, etc, etc?

Years ago we ran a project (1990s) with 30-40 subs on site at one time(27 flat conversion out of commercial property), these days I would never take the risk, I would want a main contractor with everyone under him and give him site responsibility, the risks of incident these days are no different but the consequences re error are a lot more nasty.

Edit-also be clear re works re alteration/extension which of your professional team owes a duty of care to who, if you sell once done will purchasers want warranties from your team, have you addressed this with your team, if not then certainly re splitting/forming/extending you may have selling issues- if this is just a cosmetic job not an issue really (except gas/electric sign off) but if more beware, solicitors and their clients may look for more than you have arranged to provide.

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Scalloway Castle
By scalloway
22nd Jun 2017 21:22

Painting and decorating is a construction operation

https://www.gov.uk/government/publications/construction-industry-scheme-...

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