CIS deductions

CIS deductions

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My limited company client has found himself acting as an agent supplying labourers to a client.  He hires the labourers from a supplier.  My client is not a building company but basically has good connections and has been able to earn a bit of a margin on this.

From looking at CIS it seems that his client has to pay 20% over to HMRC and so my client will only get 80%.  The amount that has been paid as CIS will be much more than his corporation tax bill will be.

Is there any way that his supply of labour to his client could be seen as outside CIS.  They are not his employees.  The only relationship he has with the labourers is that he has hired them from a company with whom he has a good relationship. 

Is there any way of making an early claim from HMRC to claim back some of the 20% CIS deduction?

Thanks

Replies (7)

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By Democratus
12th Apr 2013 16:53

Ltd Co

Your posting isn't clear as to who is doing what for / to whom. 

Assuming your client is registered for CIS and is verified as Net then 20% would be the correct deduction by your clients client, the other being Gross and no deduction taken.

The correct route to recover is to offset against PAYE each month 1st.

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By ShirleyM
12th Apr 2013 16:55

No

There shouldn't be much of an overpayment, and you can't get early repayment of CIS tax suffered.

You can offset CIS tax suffered against PAYE/NI and the CIS tax withheld from the subbies, though.

You can apply for Gross payment status if the company qualifies.

He should have taken advice and checked the requirements before embarking on this. Unless he is getting good commission the admin won't be worth the hassle.

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By User deleted
12th Apr 2013 17:20

CIS?

And who is being paid for what?

If I've got this right - your client is hiring staff from supplier A. He is then supplying the same staff to company B (who is presumably in the construction industry). It doesn't sound as though your client is within the scope of CIS, and even if he is I don't think payments under deduction are in point.

If he's supplying staff, then he is effectively acting as an employment agency. Agency rules normally trump CIS rules, so he should either be operating PAYE procedures as normal (if he's paying the staff) or he should be receiving gross payment from the end-client, making gross payment to supplier A who should then be operating PAYE.

EDIT - it will be necessary to look at the exact terms of the relevant contracts, since despite my comments above it is possible for the agency to be treated as a sub-contractor.

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By imbs
12th Apr 2013 21:11

Let me clarify

My client, company A Ltd, has business connections with company B Ltd. Company B is in RoI but needed some staff to work on a site in UK and asked my client A Ltd if he could get him some staff to work the UK site. My client is a one man company min wage and top up dividend.

My client approached a business acquaintance, company C Ltd, a UK company, and asked if he would "borrow" some labourers on behalf Of company B. So company C raised invoice to my client company A. My client applied gross payment status to the invoice since C is a large construction co meeting all the gross status requirements.

My client then added some margin onto the costs and raised his invoice to Company B.

My client is v small, and company B, the RoI company, has deducted 20% from his invoice and made CIS payment. My client will not have any PAYE to pay since he is taking min wage. His cash flow is severely distorted and the amount deducted is much more than the corporation tax payable.

This doesn't seem right. Can anyone shed some light.

On a separate note, he has applied reverse charge to his invoice to ROI company since labour is not land related service so B2B general rule applies. Is this right? Thanks everyone

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By User deleted
12th Apr 2013 21:21

Still don't know enough ...

... about the contractual arrangements with A, B and the workers.

In any event, the corporation tax liability is irrelevant - the excess CIS tax should be claimed through the annual PAYE return.

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By imbs
12th Apr 2013 22:42

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So can he claim it in the 1213 Ers PAYE return? The dublin company paid my client his 80% in march and are due to pay the CIS over by 19th apr.

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By User deleted
13th Apr 2013 08:27

Yes

If the payment advice was dated before 6 April you should be able to recover the tax via the 2012/13 return

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