Taking on subbies

Taking on subbies

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If an individual trading through a limited company is registered as a CIS sub contractor and then takes on an individual for just one job for example, does he then have to register as a contractor and start doing CIS monthly returns? Or can he just pay the sub contractors invoice in full? Is there a limit or a trigger point when CIS returns must be done? Thanks

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RLI
By lionofludesch
04th Feb 2015 09:43

Strictly, if he's in the construction industry, he should register.

In practice, I'm wondering whether any potential tax and penalty would be greater than your fee for setting up, operating and closing down the scheme.  A genuine one-off payment, you say ? How much is the payment ?

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Euan's picture
By Euan MacLennan
04th Feb 2015 10:28

One-off payment?

... until the next one-off payment ... and the next ...

The company is registered as a CIS sub-contractor.  It cannot pretend ignorance of the CIS rules.  If the work done by the self-employed subbie is a 'construction operation' as defined in the rules, the company must register as a CIS contractor, verify the subbie, deduct tax accordingly, give the subbie a deduction statement (AKA payslip) so that he has evidence of the tax deducted and file monthly returns.

A better alternative might be to treat the subbie as an employee.  The company probably has a PAYE scheme to pay the "individual", so it could take on the subbie as a short-term employee and deduct the tax due, if any, on PAYE code 1000L Month 1 (assuming that the subbie has no other PAYE employment or pension) and NIC, then give him a form P45.

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By Jonrich
04th Feb 2015 10:53

Thanks, I thought that was the case but just wanted to check as it would be a lot of hassle to set it up for a one off payment, but just wanted some back up if he asks why my fees are more.

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By sparkler
04th Feb 2015 12:20

Not too onerous

I have a client who used some subcontractors on a couple of "one off" occasions.  I only realised this when I prepared his management accounts for the quarter. Needless to say, he should have registered for CIS, which I did retrospectively, completed the overdue returns as required, and then set up a "nil return" notifcation with HMRC which is valid for six months, and just requires a quick phone call every 6 months to get it set up again.  We have the reassurance of knowing that the CIS scheme is there if required, and the client knows now that he must tell me as soon as he uses a subcontractor.

My client was fined for the overdue CIS returns, but all penalties were removed when I appealed.

I didn't find the process particularly onerous or time-consuming.

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