The CIS tax regime - 2 years on

Monthly statements are a problem - some Contractors do not provide any statements (we know it isnt the subcontractor losing them because many of our subbies have the same problem with the same contractors), and many contractors provide weekly statements, rather than monthly.

Sometimes the statements don't match reality (we get bank statements from subbies and cannot reconcile receipts with the statements!)

I agree wholeheartedly with the post by Anonymous above that many Contractors are not providing Subcontractors with monthly pay statements. This is a real problem for the Subcontractors that we act for and they work for many Contractors not just one miscreant Contractor. It seems that it is the exception rather than the rule where Monthly Statements are provided. I don't recall this being so much of a problem with the old style CIS25 Vouchers.

has anyone else come across the scenario where there would be a squad of about 5 subbies working on a site together but only one of them "lifts the cheque". This has happened a client of mine - one guy gets the cheque and monthly contractor statement, all in his name. But he then gives cash to the rest of the squad. Does my client totally loss out her - no statement, no proof of tax deducted? He will end up having tax to pay rather than getting tax back like everyone else! (apart from the other boys on the squad also getting cash)

Sorry Anonymous, but I am not sure whether your client is the one who "lifts the cheque" or is one of the boys who receives cash. Can you clarify?

sorry - hes one of the boys getting the cash unfortunately

The way I understand it, is that it is up to the contractor to issue statements, whether they are weekly, monthly or annually. I deal with a CIS for one of my clients and I find that a subbie will never ask for a statement and if you issue them regularly they always lose them. Therefore, I always issue statements annually, to 5 April with all payments made and tax deducted. Obviously, if ever I was asked for a statement prior to Year End this can be provided. The onus is on the Contractor to issue these statements.
With reference to the cheque issue. The Inland Revenue say that the payment can only be made to the subbie who does the work, you can't even pay to another person on their behalf, even if they are related. Again, it is the contractor who is responsible for making the payment to the person who did the work and deducting the relevent tax. However, if the 5 subbies all work for this particular guy who is collecting the cheque, then the payment would be to his company, and he in turn would be the contractor and have to pay them according to CIS rules, by deducting the tax and paying it over to the Inland Revenue. The question would then be asked, are they a subbie or an employee of the guy collecting the cheque.

Your client is acting as a "gangerman". There are a number of potential pitfalls here:-

1. The turnover for the gang all "belongs" to your chap and so he may well have breached the VAT threshold.
2. The guys that he is paying are his sub-contractors and he should be deducting tax from them and be registered as a contractor himself. In turn he should be submitting the necessary forms.
3. Unless he is trading through a limited company it is my understanding that he cannot offset the tax he has had detucted from the gross amount he receives against the liability he has for the tax he has "deducted" from his subbies.

The client is apparently the guy at the bottom of the tree picking up the cash. Therefore the comment above, whilst technically OK, is referring to the wrong taxpayer.

The client will, presumably, need to gross up the income received for tax return purposes and show the tax deducted. The white space can be utilised to explain the entries.

Nightmare!
thank you to all who responded and confirmed my worst fears.
why do builders get themselves into such a tangled web and leave us to sort their mess up!

thanks again

I submit the monthly CIS returns on behalf of a client. I find only having two weeks, from the 5th to the 19th of each month, is very tight. He is a small Contractor with no one to cover in his absence. If either one of us is on holiday, it is very tricky to get returns done on time.

I agree the turnaround timeframe is ridiculous.

If you have to provide holiday/sickness cover for your colleagues who have CIS clients; it creates further problems.
I have to work my holidays around the payroll and CIS clients.

Accountants and payroll specialists are apparently not entitled to have time off; but phone up HMRC and they will tell you they are shortstaffed hence they cannot make a repayment back to a contractor. That's if you can get through on the phone. I believe the CIS helpline should be renamed; "You will get no help from us; go away."

God help us when the new PAYE penalties apply next year.

I find the whole system quite rediculous, with trying to get the contractors to issue statements, the subcontractors not being issued with the statements, and even being told that due to the system change, there is now no need to report the tax deducted to HMRC.

We don't get the help we need from the Revenue in verifying the deductions made, so the next we know is the onslaught of tax investigations which, albeit additional revenue for us is not what we signed up for when we decided on this career.

Can we please go back to the old system, as the subcontractor at least knew that without the voucher, he couldn't claim the tax deducted.

If subbie doesn't get a monthly statement, and prepaid tax is not recorded on SA100 ... but ... the contractor has submitted details and paid CIS Tax over to HMRC.

This prepaid tax does not appear on Agents online service so accountant not aware of it.

Do HMRC refund the overpaid tax ????

It seems to us that because the Revenue no longer provide Vouchers many Contractors believe that they no longer have to provide any form of confirmation of the CIS Tax that has been deducted.

This causes problems for approximately half of the Subbies that we act for. If that is repeated across the country, that is a significant failing of the CIS Scheme.

I work for one of the larger groups in the sector, and with the appropriate systems giving the statements out isn't a problem. They are pre printed with a large red watermark saying that it's an important document and should be kept safe.

I also as it happens do work for another related company that doesn't have the system and it's a real B******S to do manually.

The whole system needs a looking at, and by this i mean the lifesucking system that is the money hungry government (of any persuasion) that believes we are there to fund their political ambitions which revolve around spending as much as possible in as inefficient way possible with little or no controls in place and run by an unaccountable civil service who never have to pay for mistakes as there is always the taxpayer. My goodness it's just like Banking.

The problem as I see it is that there are two types of builder - those within the CIS scheme who follow the rules & regs (or at least try their hardest to do so) and those outside it. The ones outside it are the minority, although still numerous enough to be significant.

SO what happens is that HMRC & the Goverment try to tighten the legislation to bring those outside the scheme into it. But what actually happens? Those outside it are that much less likely to come into in because the admin burden is greater, AND some of those within it get totally fed up and join the outsiders. So making the rules tighter and tighter is totally counter productive. The problem is, no matter what rules are in place there will be some dodgy types who just won't play ball. It's been a part of the industry for too long and just won't go away.

It would seem to me that given HMRCs ability to do joined up thinking, (raised eyebrow and tongue firmly in cheek), and assuming that they don't get rid of CIS at the same time, the likelihood that the contractor will receive a gross status notification at the same time as they are forced to make a subbie a deemed employer is quite small in my opinion.

It is clear that CIS has failed, deemed employment is an even bigger sledgehammer, and like all blunt instruments may well cause more damage than good. It is time this government realied that taxation is not a tool that is best suited to carrying out social policies. If they want all "workers" to have similar rights to sick pay etc and at the same time ensure equitable taxation, not the correct amount whatever that is, then changes to the NIC legislation coupled with additional government support for the genuinely self employed to allow these rights which are enjoyed, and paid for through taxation by employees are what is needed.

Anyway i keep drifting off topic. Jim, your point is that the scheme is working smoothly, i assume you don't mean it is doing what it was intended to do but rather is being administered reasonably efficiently. Hard to argue with that - the change needed would be for HMRC to stop changing status one day and then two or three days later reversing their decision.

Because there are monthly submissions to HMRC by contractor, I fail to see why HMRC cannot make this information available to the sub-contractor (or his agent).  The information is on the HMRC computer - so why not.

It would enable sub-contractors to know that the contractor was (reasonably) up to date, deductions could be checked in year and problems resolved.

I understand that HMRC put the onus onto the contractor to produce statement, but this is not happening sufficiently well in practice (and has been commented above the loss of the vouchers was a retrograde step - an optional voucher would have been better for many smaller contractors to use).  We only deal with a few subbies, all but one of them have trouble obtaining the statements.

HMRC consistently fails to comprehend it's part in making a system work better for all concerned

I too, fail to understand why HMRC cannot make this information, and PAYE payments, available online. It would save accountants, and HMRC, many hours sorting out the mess that arises with these systems.

I also agree with the earlier post that the administration required is quite high, with tight deadlines.

A small matter, I know, but just making the period concide with the month end would make administration easier. After all, most accounting packages work on a monthly basis ... not from the 6th of one month to the 5th of the following month. The same  applies to payroll, self assessments, etc. Why are we still stuck with the 5th April?????

Sorry Andy, I cannot agree. The old voucher system was deeply flawed - obtaining them from HMRC wasn't easy, they were expensive to print and the gross paid vouchers were ignored in many cases.

That is why HMRC decided not to stipulate any form of proof-of-deduction, merely to make it a condition of paying a subbie net.

It is fair to point out that some contractors are not issuing the certificates, or only on a quarterly or annual basis. However, the subcontractor is in business. It can be difficult enough to convince HMRC of this in status discussions - when the subbie cannot be bothered to keep records, that compounds the problem. If it's too much effort to write down once a week, billed £400 - paid £320, then the subbie is asking for trouble.

We have to bear in mind that some contractors do not conform to regulations.

The PAYE online system should give more of the available information to assist where the subbie does NOT get a monthly statment, as we would be able to check if the tax deducted from subbies was actually being reported. (Anyone have an easier way for timely discovery of tax dodgers?)

It isn't always the subbie losing statements, as we get many subbies having problems with the same contractors. HMRC don't seem to be interested in sorting out these contractors.

WHEN  CONTRACTORS DO THEIR MONTHLY RETURNS

CAN THEY HAVE A DROP DOWN BOX TO SEE WHO AS  STOPPED THEM TAX AND POSTED IT TO THE REVENUE  THEY WOULD BE IN A POSITION EACH MONTH TO KNOW WHAT TAX THE REV ARE HOLDING THIS COULD BE RTI IN REVERSE OR IS THIS TO SIMPLE PLEASE LETS PLAY OFF THE SAME EQUAL PLAYING FIELD INSTEAD OF ALL THE SECRECY FROM  CIS DEPT

Mike