Share this content

CIS Deductions

CIS Deductions

Didn't find your answer?

I have a 'situation' where a CIS contractor sometimes has their CIS subcontractors purchase tools which the contractor then reimburses them for. These tools are/will be considered assets in the contractors accounts. 

Should the contractor be deducting CIS in this setup?

I appreciate the easy answer is for the contractor to purchase those tools themself, or load prepaid cards or something of that nature but the client says this is not an option due to their work setup.

Would it make any difference if the tools purchased were in the contractors name, still purchased by the subcontractor for the contractor?

I can only see 5 specific reasons on CIS340 where CIS shouldn't be deducted and purchasing tools for the contractor isn't one of them. I'm wondering am I missing anything? For example the payment is for a tool which the subcontractor is simply giving directly to the contractor - perhaps outside the scope of CIS?

Any help is greatly appreciated.

Replies (18)

Please login or register to join the discussion.

Scalloway Castle
By scalloway
27th Oct 2021 19:32

Deductions must only be made from that part of the payment that does not represent the cost of materials incurred by the subcontractor. I would class tools as materials.

Thanks (0)
Replying to scalloway:
avatar
By Paul Crowley
27th Oct 2021 20:54

But it is odd and asking to be looked at

Thanks (0)
My photo
By Matrix
27th Oct 2021 20:47

If the subcontractors are not using their own tools then they sound more like employees.

Thanks (5)
Replying to Matrix:
avatar
By Paul Crowley
27th Oct 2021 20:54

+1

Thanks (0)
Replying to Matrix:
avatar
By TheNovice
28th Oct 2021 18:04

Matrix wrote:

If the subcontractors are not using their own tools then they sound more like employees.

I'd actually be inclined to agree on the tool point however just to clarify the majority of tools are actually brought in by the subcontractor. There are however some more specialist tools that are bought via the subcontractor for a specific job, used for that job and then passed over to the contractor.

Thanks for your response.

Thanks (0)
avatar
By Paul Crowley
27th Oct 2021 20:53

Materials are exactly what the word says
Materials supplied to the contractor
Not other costs of the subcontactor

Give that tax deducted is an asset of the subcontractor, but tax not deducted is a fine on the contractor, I see no point in trying to be creative

However if it is a genuine supply of real tools to the contractor then I see no problem
But very difficult to see why contractor unable to buy
As such any visit is likely to need good explanations so best that subbie supplies the invoice
Subbie cannot make even 1p profit to stay within the rules

Thanks (1)
Replying to Paul Crowley:
avatar
By TheNovice
28th Oct 2021 18:07

Paul Crowley wrote:

Materials are exactly what the word says
Materials supplied to the contractor
Not other costs of the subcontactor

Give that tax deducted is an asset of the subcontractor, but tax not deducted is a fine on the contractor, I see no point in trying to be creative

However if it is a genuine supply of real tools to the contractor then I see no problem
But very difficult to see why contractor unable to buy
As such any visit is likely to need good explanations so best that subbie supplies the invoice
Subbie cannot make even 1p profit to stay within the rules

Thank you Paul and completely agree. The contractor is exposed for what appears to be no apparent reason.

Thanks (0)
avatar
By Hugo Fair
27th Oct 2021 21:10

Is this the same CIS client you referenced 3 months ago at https://www.accountingweb.co.uk/any-answers/cis-gross-or-net ?
They seem intent on making your life (and that of their subbies) unnecessarily complex.

Thanks (2)
Replying to Hugo Fair:
avatar
By Paul Crowley
28th Oct 2021 09:32

If same client then the explanation is probably made up
Only idiot contactors engage in made up "materials"

I refer to my prior answer

Thanks (1)
Replying to Hugo Fair:
avatar
By TheNovice
28th Oct 2021 17:57

Hugo Fair wrote:

Is this the same CIS client you referenced 3 months ago at https://www.accountingweb.co.uk/any-answers/cis-gross-or-net ?
They seem intent on making your life (and that of their subbies) unnecessarily complex.

It is indeed and you're completely right he seems to be.

I've spoken with the contractor this morning in a final attempt to get them to keep things simple (and correct) otherwise I think it will be a case of having to part ways.

He has the attitude that "I can't do that or they won't take the work". I've attempted to convey that and tax deducted will simply be reclaimed on their next available tax return, that HMRC will/do not care and that it's his obligation to deduct the correct amount of tax for his subcontractors - I think he fails to understand his exposure here although I seem to warn him monthly.

Thank you.

Thanks (0)
RLI
By lionofludesch
27th Oct 2021 22:19

Is the reality that, for practical reasons, the subcontractor is buying tools on the contractor's behalf?

To whom is the invoice issued?

How much is spent on these tools?

Thanks (0)
Replying to lionofludesch:
avatar
By TheNovice
28th Oct 2021 18:14

lionofludesch wrote:

Is the reality that, for practical reasons, the subcontractor is buying tools on the contractor's behalf?

To whom is the invoice issued?

How much is spent on these tools?

Hi Lion,

The reason for this (as just mentioned above) is that the subcontractor may need a specific relatively specialised tool for a job which they'll go and buy, use for this job and then send/give it to the contractor.

The contractor has said that these are all in his company name but I'm yet to see an invoice. This is the first month of this happening.

Not all of the subcontractors are locally based so sometimes the contractor will purchase the tool for that job and they will then DPD it to the contractor or drop it off. A very parculiar setup I know. Alternatively, if they are locally based it can still happen, the contractor is generally a PM so will always be on-site and he will send subcontractors to get the tools with their own money then reimburse them.

The tools are ranging from £200 - £1,500 but it's now happening frequently with each subcontractor.

The more cynical side of me also suspects it may possibly be a way of him trying to pay additional amounts to the subcontractors' net of CIS.

Thanks (0)
Replying to TheNovice:
RLI
By lionofludesch
28th Oct 2021 18:19

TheNovice wrote:

lionofludesch wrote:

Is the reality that, for practical reasons, the subcontractor is buying tools on the contractor's behalf?

To whom is the invoice issued?

How much is spent on these tools?

Hi Lion,

The reason for this (as just mentioned above) is that the subcontractor may need a specific relatively specialised tool for a job which they'll go and buy, use for this job and then send/give it to the contractor.

The contractor has said that these are all in his company name but I'm yet to see an invoice. This is the first month of this happening.

Not all of the subcontractors are locally based so sometimes the contractor will purchase the tool for that job and they will then DPD it to the contractor or drop it off. A very parculiar setup I know. Alternatively, if they are locally based it can still happen, the contractor is generally a PM so will always be on-site and he will send subcontractors to get the tools with their own money then reimburse them.

The tools are ranging from £200 - £1,500 but it's now happening frequently with each subcontractor.

The more cynical side of me also suspects it may possibly be a way of him trying to pay additional amounts to the subcontractors' net of CIS.

If the invoice checks out, I'd argue that you're grand.

Either way, the contractor is gaining nothing but increased exposure to an HMRC debt. He needs to understand that it is he who is the only loser here, whilst the subcontractor gains nothing but a small time value of money benefit.

But much depends on the veracity of what you've been told.

Thanks (1)
avatar
By Leywood
28th Oct 2021 12:13

''client says this is not an option due to their work setup.''

Why?
Have you really pushed back on this to understand why and whether or not its a daft answer. I usually find that clients give daft answers and I can put them straight. Makes things easier all round then.

Thanks (2)
Replying to Leywood:
RLI
By lionofludesch
28th Oct 2021 12:25

We're not getting much feedback.

Lots of questions. Not many answers.

Thanks (0)
Replying to lionofludesch:
avatar
By Leywood
28th Oct 2021 12:32

Same on their prior question!

But vocal on some other folks Qs!

Thanks (0)
Replying to lionofludesch:
avatar
By TheNovice
28th Oct 2021 18:00

lionofludesch wrote:

We're not getting much feedback.

Lots of questions. Not many answers.

Apologies for my long response time, I have my final ACA exams and a CTA exam next week so unfortunately for me most of my available waking minutes are focused on those.

I do however like to have a break and browse AW :)

Thanks (0)
Replying to TheNovice:
RLI
By lionofludesch
28th Oct 2021 18:15

TheNovice wrote:

Apologies for my long response time, I have my final ACA exams and a CTA exam next week so unfortunately for me most of my available waking minutes are focused on those.

I do however like to have a break and browse AW :)

Ach - take no notice.

We're too impatient.

Thanks (1)
Share this content