Alternative to CIS

Alternative to CIS

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Is it possible for CIS subcontractors to adopt LLP model (i.e form a LLP to invoice the agency and receive LLP's profits as non-CIS self employed)?

Thanks in advance

Replies (9)

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By ShirleyM
28th Sep 2014 12:09

What are you trying to achieve?

The trading status will not affect CIS status. The only way to prevent CIS deductions is to obtain gross payment status.

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Replying to paul.benny:
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By Ellyxris
28th Sep 2014 17:45

CIS Alternative

Many thanks for your response.

I am just trying to establish whether there exist a legal option to avoid a CIS subcontractor being classified as an employee for tax purposes under the new strict Supervision, Direction and Control tests.

 

My understanding is that as a LLP partner, a subcontractor can easily be classified as self employed for tax purposes or am I missing something?

 

 

Thanks in advance

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By carnmores
28th Sep 2014 16:48

NO

no no

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By DMGbus
29th Sep 2014 08:32

Ltd Co or partnership - yes better for paying contractor

From an engager's viewpoint it is better that the subcontractor is NOT a sole trader, ie. it is better that the subcontractor is a Ltd Co, patnership or LLP.

By having this alternative status for the subcontractor the PAYE risk passes to the subcontractor who (by not being a sole trader) has to consider IR35 issues.

 

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Stepurhan
By stepurhan
29th Sep 2014 08:33

LLP is self-employed

For tax purposes, an LLP partner is exactly the same as a partner in an ordinary partnership. They are self-employed. They will be as subject to CIS as any other self-employed person.

If the individuals did become employees (more likely of a limited company, though some could be employees of an LLP is not all were partners) then the head subcontractor would still be subject to CIS.

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Replying to LostinSuspense:
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By Ellyxris
30th Sep 2014 08:40

Alternative to CIS

Many thanks for your response.

 

Does that mean that the profit they get from the LLP is treated as CIS payments? I am not entirely sure how this can happen since the LLP is not a CIS registered organisation. All the LLP would do is to invoice the agency, account for expenses and distribute profits to LLP partners.

 

Thanks in advance

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Replying to M GD:
Stepurhan
By stepurhan
30th Sep 2014 09:03

It should be

Ellyxris wrote:
I am not entirely sure how this can happen since the LLP is not a CIS registered organisation.
As I said before, an LLP is a partnership for tax purposes. It should follow all the normal CIS rules for partnerships.

I really think you need to do a fair bit of studying on LLPs if you propose continuing to act for one.

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By LuKosro
29th Sep 2014 20:09

When working with self employed individuals, the CIS contractor or intermediary bears the risk of being audited by HMRC in respect to the employment intermediaries legislation. They need to show that the self employed individuals are not supervised, directed nor controlled by the end client. 

If the subcontractors work as limited companies or limited liability partnerships, then they need to comply with the IR35 legislation (with different tests) and therefore they bear the risk of a HMRC audit.

Some say that both IR35 and agency rules apply to these Personal Services Companies if there is also an agency involved between the PSC and the end client. 

 

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By ShirleyM
30th Sep 2014 09:35

@Ellyxris

From which 'side' are you acting?

Are you acting on behalf of a contractor, and want to avoid making CIS deduction from subbies and/or prevent putting them on payroll, or are you asking on behalf of the subcontractors? It would appear you are acting on behalf of a contractor as otherwise the self-employment wouldn't be a problem.

What benefits one may one not benefit the other, and you have mentioned previously that you are not an accountancy practice, but want to offer accounting services to clients, so I am still confused what you are trying to achieve.

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