CIS Query

CIS Query

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I have a client who has never sub-contracted any work before, he is an electrician. I have just discovered he did some work for one of his clients which involved re-plastering an area of ceiling. So he organised a plasterer. The plasterer sent his invoice to my electrician and he has paid him.

Obviously, he should have set himself up as a contractor, then verified the plasterer and deducted the necessary tax. However, it's been done and dusted. It will probably be a one off, however, should he set himself up and then amend the invoice & claim the tax back from the plasterer to pay over to HMRC or should he own up to his error with HMRC. Has anyone else come across this problem and if so, how did they deal with it.

Many thanks

Replies (10)

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By jimeth
15th Mar 2010 12:08

What he should have done

Rather than setting himself up as a contractor, etc; what he should have done was to have passed the invoice on to his client to settle directly with the plasterer.  That would have avoided all CIS issues for him.  That should be the advice for people who do not regularly subcontract work but occasionally arrange another tradesmen for clients, if they want to avoid the bureaucracy of CIS.

As to how to dig the electrician out of the hole he is now in - I will have to leave it to others to recomend the best approach.

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By User deleted
15th Mar 2010 12:12

Frequently

Large parts of the construction industry are simply ignoring this.

I agree he should have done it properly and not paid the man until he was verified.

Unfortunately it is done now and you cannot change history.

You might want to consider money laundering, but as the man did not do this deliberately I do not see how it can be a reportable offence either. I would make a note any way KYB !

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By User deleted
15th Mar 2010 13:48

Maintenance?

Are you sure that the work done was a "construction operation". Sounds as if it might be maintenance work to me - otherwise the main contractor would surely have organised the plasterer to "make good".

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By User deleted
15th Mar 2010 15:21

I see says the blind man

That explains why large numbers of contractors and subcontractors are not applying the CIS. !

I suggest the previous two posters re read the guidance ! and discover what comes under construction work.

1. Are you a contractor or a subcontractor ?

2. Then are you carrying out construction work. (see list for what is covered)

3. Follow the rules. (penalties if you do not)

 

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Euan's picture
By Euan MacLennan
15th Mar 2010 16:18

Some confusion here

The electrician is a contractor who has engaged the plasterer as a sub-contractor in the construction industry to undertake a construction operation.

The electrician would also be a sub-contractor to the homeowner if it were not for the fact that homeowners are exempted from being contractors in the construction industry.  It is only the transaction between the electrician and the homeowner which is excluded from CIS.  It is irrelevant that the plastering work done by the sub-contractor is in someone's home - he is working for a contractor in the construction industry and is subject to CIS (or to PAYE if he had been treated as an employee of the electrician).

As Jim said, the solution would have been for the plasterer to bill the homeowner direct, but this does not help the OP deal with the problem.  The least expensive option is to lie low and hope the plaster never hits the fan.  The devious option is to spell it out to the electrician client (£100 a month penalties, etc.) and encourage him to instruct you not to report it to HMRC (although you might then have to report it to SOCA, unless perhaps you know that the plasterer has paid tax on the gross income).

It is not an easy decision because of the grossly disproportionate penalties imposed under CIS.

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By User deleted
15th Mar 2010 17:27

Thanks to all

My feelings on this have really been confirmed. I completely agree my electrician should of got the plasterer to bill the client direct. I also agree that he has contracted the work to someone else and therefore should have been set up as a contractor and deducted tax under the CIS scheme. However, as some of you quite rightly say, this in now history and there is no going back.

I will of course be advising my client on how to deal with any future work of this nature, and hope as you say Euan, that the plaster doesn't hit the fan.

Thank you all for you responses.

 

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By User deleted
15th Mar 2010 23:49

Not in the CIS Scheme

Maintenance and repairs and not within the CIS Scheme.  You will need to search out the details on the HMRC site to confirm this (opinions are useful to hint the direction to look but do check it before relying on anything in these kind of matters.

That being the case (we assume the invoice spelled out that it was a repair of a ceiling that someone accidentally put a foot through, rather than a new ceiling plaster job), then there would be no foul and no worry of penalties.

But if this was part of the electrician's installation of rewiring the house, it would be hard to regard it as not a new install, in which case a foul has occurred and you need to take some corrective action.  Possibly the nicest action would be the electrician has to report it and hope that his honesty saves him some of the penalty money.  Presumably the plasterer will get embroiled too. 

I guess it would be fraud for electrician to credit the plasters invoice and get the plasterer to raise a new invoice to the home owner, and give an equal sum of cash back to the homeowner so he could pay the plasterer directly, thus undoing the foul?  Probably something wrong with that, eh?

 

 

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By User deleted
16th Mar 2010 18:00

Related issue - letting agent contracts various trades.

In general, I'm confused whether the above says maintenance work escapes the CIS, and what is the definition of maintenance?

Can I ask whether a letting agent has any responsibilities under the CIS?

Letting agents contract various trades, who may subcontract others, to carry out maintenance/repairs on their landlords' properties. Does the agent have any responsibility under CIS?

Does it make any difference if the work is construed as renovation/improvement of the property?

I seem to recall something about an annual financial limit, above which the agent would come under the CIS. If so, does the limit include maintenance + improvement works, or just improvements?

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By Malcolm Veall
16th Mar 2010 21:53

Repairs

Per:  http://www.hmrc.gov.uk/cis/decide-if-cis.htm

 What are construction operations?

CIS covers construction operations carried out in the UK. The rules of the scheme define the types of work that are classed construction operations. But as a general rule, the scheme includes almost any work that's done to a:

permanent buildingtemporary structurecivil engineering work or installation

Some examples of the types of construction work that are covered by the scheme include jobs like:

site preparationgeneral construction - bricklaying, roofing, plastering and so onalterations and extensionsrepairs and refurbishmentdecoratingdismantling workdemolition

This and the detailed CIS348 'The scope of the scheme - a quick guide'. seem to make no distinction for repairs as opposed to construction.

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By Harrisd412
22nd Mar 2010 15:12

CIS operation

I have removed my previous posting because I made some assumptions that might not be correct.

Having reviewed CIS 340 I believed that your electrician normally repairs domestic intallations and this falls outside the scope of CIS (page 68 CIS340). I also assumed that this was also a repair however the work needed a plasterer to make good the repair. If this was not a domestic repair then many of the postings are correct however if this was a domestic repair and he contracted labour to finish the repair I think HMRC would be very picky to suggest your electrician was performing work within the construction industry. If the job itself is a repair (not instalation) of heating or electrical instalations then surely the fact that he subcontracted labour does not bring the job within CIS? However, if he is normally within CIS or the operation itself was CIS then I would agree with everyone else.

If there is any doubt then you could ask a general query via HMRC Cherry Court, 36 Ferensway, HULL, HU2 8AQ.

 

 

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