CIS Subcontractor turned Contractor

CIS Subcontractor turned Contractor

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CIS subcontractor turned small contractor, has paid another subcontractor for work before registering as a contractor. He is claiming that he didn’t know he needed to as long as he registered before the end of the tax year.

He has now registered as a contractor, but how can he declare the wages paid before be registered?

The receiving subcontractor also has a business doing other work such as house clearances, garden maintenance etc (not CIS) and only occasional works as a subcontractor when other work is quiet.

Thoughts please.

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By levelheaded1903
05th Apr 2013 15:22

The work

Hi, what kind of work was carried on by the subcontractor for the "contractor"? I had something similar a while ago, and asked a colleague of mine who has worked with CIS, and they said, that if the work that had been carried out was in a domestic property / house etc, it would be outside the rules anyway, so your "contractor" would be ok to pay the subcontractor gross.

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Replying to emanresu:
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By Euan MacLennan
05th Apr 2013 15:50

CIS applies

levelheaded1903 wrote:

Hi, what kind of work was carried on by the subcontractor for the "contractor"? I had something similar a while ago, and asked a colleague of mine who has worked with CIS, and they said, that if the work that had been carried out was in a domestic property / house etc, it would be outside the rules anyway, so your "contractor" would be ok to pay the subcontractor gross.

You may have misunderstood your colleague.  A homeowner cannot be a CIS contractor in respect of work done on his home, so is not obliged to account for CIS tax on his payments to your client, but if your client has taken on a sub-contractor to do work on the homeowner's home, the exemption from CIS does not extend down the line - your CIS contractor client is required to deduct CIS tax from his payments to his CIS sub-contractor, provided that the work done by the sub-contractor is included in the definition of a construction operation.

This is one reason (the other being keeping below the VAT registration threshold) why "contractors" sometimes get their workers to bill the home owner direct.

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By Democratus
05th Apr 2013 15:33

Wages?

1st check if a true subcontractor relationship existed - you state "how can he declare the wages paid ". If it's not a true subcontractor relationshiop then CIS doesn't apply, but you may have a PAYE issue with respect to employment.

If it is a true succontract relationship then as levelheaded1903 says you then need to check if the work falls under CIS. Not all domestic property falls outside CIS so check carefully. Is the receiving subcontractor's status Gross, This will be useful as no deduction should be made.

 

D

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By levelheaded1903
05th Apr 2013 17:41

@euan
Many thanks for clarifying this, I will make sure that the info is passed on!

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