CIS Deductions

CIS Deductions

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I am looking for some advice/suggestions relating to the deduction of CIS from a customer invoice.  We have performed work for a customer who have contacted us advising they will need to make CIS deductions from our invoice total.  We consider that the deduction is unnecessary because the work that we do is not considered to fall within CIS scope. Although a grey area, we do have a letter from HMRC stating that their general view 'on the basis of the information [on the work we do], it does appear that your work will fall outside the Scheme'.  Our customer is insistent on making the deductions because it is their responsibility to make that decision but clearly this has an impact on our cashflow.

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Euan's picture
By Euan MacLennan
23rd Oct 2014 13:41

You could try ...

You could try sending the customer a copy of your letter from HMRC, but at the end of the day, you are not going to refuse to accept 80% of your sales invoice value if the customer still insists on deducting CIS tax.

If you are a company, you can reclaim the tax suffered immediately against your PAYE liability on your own employees (and any CIS tax deducted from your own sub-contractors, but presumably, there is none because you consider the work they do is not a construction operation) by filing an EPS.

If you are a sole trader, you will get a credit against your 2014/15 tax liability, so you could claim to reduce the payments on account due on 31 January and 31 July 2015.  Not so immediate, but better than nothing.

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By Gem7321
23rd Oct 2014 13:42

What was the work?

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RLI
By lionofludesch
23rd Oct 2014 14:05

How much ?

Is it a lot of money ?  Because you'll get credit for any tax deducted against your tax bill or PAYE bill.  The tax "charge" doesn't cost you anything - it's just a timing difference.

If it's not a huge sum, just run with it because fighting it will just involve you in pointless effort.

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By 27Spots
23rd Oct 2014 14:13

Thank you for the responses. I didn't realise that we could immediately reclaim the tax suffered and thought we had to wait until we file our CT return. The amounts are not large and I have already suggested to my MD that we just swallow it (and reclaim via CT), however, her feeling is that it seems to be a growing issue in our industry and therefore we need to be clear about whether to be registered or not to avoid some more significant withholdings as we take on larger projects.  We are in the sign industry - but connect to existing electrical installations, we do not do our own - hence the grey area. It is the fact that we do not do our own electrical installation that led HMRC (and us)  to conclude we were outside of scope of the Scheme.

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RLI
By lionofludesch
23rd Oct 2014 14:25

Registered

Just to be clear - you need to be registered just to get paid.

There's a separate issue as to whether you are able to be paid gross.  That's something for which to apply to HMRC.  If you're up to date with your tax payments, there's no reason why HMRC shouldn't grant such a request.

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Euan's picture
By Euan MacLennan
23rd Oct 2014 14:45

CIS sub-contractors

If you have a letter from HMRC confirming that your work falls outside CIS, I would have thought that your MD has all the clarity she needs, particularly with regard to there being no need to register as a CIS contractor and deduct CIS tax from your payments to any sub-contractors.

However, if there is a growing trend for customers to deduct CIS tax, your company must register as a CIS sub-contractor so that tax is deducted at 20% and not at 30% for an unregistered supplier.  The fact that your company is registered as a CIS sub-contractor does not mean that all customers must deduct CIS tax at 20% from everything they pay to you - it just means that any customer who takes the view that your work falls within CIS will deduct tax at 20%, not 30%.

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By 27Spots
24th Oct 2014 13:43

Thanks all, very helpful!

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