Working on accounts for limited company client who has used subcontractors on building projects but isn't registered for CIS.
Client tells me his previous accountant (retired) informed him that he was exempt because the company is taxed as an investment company (it is).
Is this correct and is it still correct if there have been some property development activities?
Informing the client of a £3,000 penalty is not the way I would wish to begin this business relationship and a scan of the CIS rules suggests he might have a point. Anyone more experienced care to offer an opinion? Many thanks.
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Take an aspirin
No direct experience, but property investment companies (the fact that the company is treated for CT purposes as an investment company may be indicative, but is not conclusive for CIS purposes) are not deemed to be CIS contractors unless their annual expenditure on construction operations exceeds £1M. Presumably, this is the "exemption" on which the previous accountant based his advice. However, for a property investment company that construction expenditure could logically only be on their investment properties.
If the company has developed properties for sale, I believe it has become a mainstream CIS contractor.
I do not know if the company would be treated as a CIS contractor only in respect of its expenditure on property development or if it would be regarded as CIS contractor on all of its construction expenditure.
I am sorry if this is not what you want to hear. I may be completely wrong. Hopefully, others more expert than me will respond to your question.