CIS clients

CIS clients

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Hello. I've now got a couple of clients who have been paying out and should have been operating a CIS scheme. I think that if I can perhaps quote some cases I may be able to persuade them, I was wondering if anyone could point me in the right direction. Many thanks.

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By ShirleyM
24th Jan 2014 21:13

Don't persuade; inform!

Tell them the legislation, and make sure they understand it is compulsory.

The penalties for operating CIS incorrectly (or not operating it) are very harsh, and you would be in the firing line if you did not advise them of the correct administration and ensure they stick to it.

In the event of them not operating the scheme, any payments made to subbies would be considered to be net payments, and your clients would be liable for the tax not deducted from the grossed up payments ... PLUS .... substantial penalties. Quite a hefty bill!

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By Euan MacLennan
25th Jan 2014 12:59

Why do you need cases?

The obligation to operate CIS is not a matter of interpretation by case law.  It is statutory law, as set out in FA 2004, Chapter 3.

If you want an example of the penalties for a contractor failing to operate CIS, have a look at this thread from yesterday.

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By new2accts
25th Jan 2014 13:33

thanks for both comments

I was going to write to clients and request they sign to acknowledge Ive pointed out the risks. Would you refuse to act for clients if they continue to pay for labour and not operate correctly or just keep issuing letter reminders? thanks

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Replying to vstrad:
By ShirleyM
25th Jan 2014 14:12

It depends ...

new2accts wrote:

I was going to write to clients and request they sign to acknowledge Ive pointed out the risks. Would you refuse to act for clients if they continue to pay for labour and not operate correctly or just keep issuing letter reminders? thanks

.... on whether you want to be party to tax evasion!

I think you should make a SAR report if they refuse to operate the CIS scheme. Would you turn a blind eye to someone being over the VAT threshhold if they refused to register?

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By cathyne
25th Jan 2014 15:46

accounts

How are the payments treated in the accounts? If treated correctly,they will show up on the tax return,at which point sure as eggs is eggs HMRC will pick them up, and local compliance will be straight on the phone!

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Replying to atleastisoundknowledgable...:
Euan's picture
By Euan MacLennan
25th Jan 2014 17:53

Not necessarily

cathyne wrote:

How are the payments treated in the accounts? If treated correctly,they will show up on the tax return,at which point sure as eggs is eggs HMRC will pick them up, and local compliance will be straight on the phone!

If the client's turnover is under £77,000 (for 2012/13), you need only complete the SA103 Short Self Employment pages with all business expenses lumped together in Box 19, so no disclosure of any payments to subbies.  Even if the turnover is over £77,000, but you still qualify to use SA103 Short, you can lump payments to subbies in Box 12, Wages, salaries & other staff costs, in the absence of any box only for payments to subbies, so again, not waving a red flag that they are payments to subbies.  Only if you complete SA103 Full would you have a problem - Box 17, Construction Industry - payments to sub-contractors or Box 18, Wages, Salaries and other staff costs.

Incidentally, by "SAR report", I assume that Shirley means an MLR Suspicious Activity Report report and not a Self Assessment Return report.  If so, I completely agree and would add that you should not file a tax return where the client is evading tax and refusing to correct the situation.

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By ShirleyM
25th Jan 2014 18:20

Thanks, Euan

I put SOCA report, originally and then remembered it had changed so I edited it, therefore you assumed correctly.

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