CIS applicable to solar installers?

Posted by richardterhorst PM | on Wed, 10/03/2010 - 16:23 760 3 comments | report

I have a new client who installs solar panels using sub-contractors. He is adament that CIS is not applicable but cannot find any guidance on HMRC website.

I would suggest solar panel installation could be classified as construction. I do not want some PAYE inspector making that ruling. So any advise or advise on where to look (been to HMRC website and lots on CIS but not who is considered a contractor in the building industry.)

Many thanks

Comments

Potentially within CIS

Anonymous | Wed, 10/03/2010 - 16:51 | Permalink

A contractor is someone who is themselves a subcontractor or carries "on a business which includes construction operations" (S.59 FA 2004).

The question then is whether the installation of solar panels is a construction operation:

S.74(2)(c) is probably the most relevant, "installation in any building ... of systems of ... power supply", but it excludes the alteration of such a system, ie if it had a power supply + wiring before, then it's probably not installation but may rather be regarded as the alteration of the system of power.

S.74(2)(a) probably also has some relevance, because it includes "alteration of ... buildings". I imagine that fitting solar panels involves drilling holes, which is an interference with the fabric of the building and so technically an alteration of that building. HMRC do argue on this basis.

I'd suggest it might very well be a construction operation and that, therefore, someone whose business includes it might very well be regarded as a contractor. It's certainly not black and white though.

Is there a trade association for solar panel installers who would perhaps have an informed (possibly negotiated) view?

An afterthought

Anonymous | Wed, 10/03/2010 - 17:13 | Permalink

Sorry, I allowed myself to be drawn straight in to the more interesting aspect of your query rather than looking at the practical considerations that are concerning you, which are one or both of:

1) Will your client have 30% tax deducted from their income if they aren't registered.

2) Will your client have to deduct 30% tax from payments made to the subcontractors.

In (1) the answer is no, if the installations are only carried out for private householders rather than for a building contractor.

Before considering (2), you need to address whether or not the subcontractors really are subcontractors or whether they are in fact employees.

Solar installers - contractors employees?

richardterhorst | Thu, 11/03/2010 - 08:58 | Permalink

Thanks for that. My understanding is that he works for private individuals although at times there are builders on site doing major work for the private person. At times he has to wait on the main contractor.

So for him there is no deduction.

Are his sub-contractors employees?

No contracts in place and typical of an SME the documentation is almost non-existent. From his remarks I would say that he is skirting very close to employee definitions for some of the staff but not all. i.e. he uses teams where one team is a main person who has a number of co-workers (employees). Another team is just one with helper and the client has more control.

Its all definitely grey area territory here. CIS would help the installers whilst keeping HMRC happy (Sort of). Without CIS he runs the danger of both being classified as in construction with CIS applicable or that he is an employer.

I have advised him to err on the side of caution as the cost if getting it wrong is too large.