Share this content
0
3858

CIS Gang leaders

CIS Gang leaders

Didn't find your answer?

Search AccountingWEB

Good afternoon

I had a meeting with a builder yesterday about CIS and Sub-contractors etc..

Basically, the Main contractor will pay only one cheque to "gangleader 1" a lump sum, less CIS. So for EG £10,000 less £2,000 = £8,000.

Now "gangleader 1" will pay Subbie 2,3,4 say £1,000.

Now I say he should take CIS from Subbie 2,3,4 of £200 so paying out actually £800 and he sends £200 CIS to HMRC.

He says that there is "a letter from HMRC "knocking" around which says that "gangleader 1" does not need to deduct CIS from 2,3,4 as it's all in the £2,000 from main contractor....

Have I missed something? I know it kind of looks like CIS on same money twice, but everyone get's it back at the end..

Many thanks in advance.

Replies (5)

Please login or register to join the discussion.

d
By puzzel
12th Apr 2012 15:32

Seen this before

Plays havoc with the cash flow, but you are right.

Only way gang leader could get round it is to apply for gross payment, but would still have to take the 20% from the subbie's that he pays

Thanks (1)
By tsp.Shaun
12th Apr 2012 16:01

CIS Gang leaders

If this is a long term contract and is going to happen for the foreseeable future then Gangleader 1 may want to incorporate. CIS in companies works differently in that CIS deducted from subbies can be offset against CIS suffered.

You should also look at the vat implications in cases like this as Gangleader 1 could be judged as having turnover as the sum total paid and not just his share of the work carried out. 

 

Thanks (1)
avatar
By Whinger
12th Apr 2012 16:30

.

Great thanks so much.

If he did incorporate would IR35 be an issue? If he's working for just one contractor for say 2 years..

thank loads really appreciate your help.

 

Thanks (0)
avatar
By Paula Sparrow
12th Apr 2012 17:17

IR35 should not apply

The Gangmaster is providing workers.  He is not obliged to carry out the work himself, therefore IR35 is irrelevant in this instance

Thanks (1)
Kye Burchmore profile image
By Kye Burchmore
16th Apr 2012 14:16

Already covered

I know it might seem an obvious point and has been partly covered in the responses but along with verifying each of the other subbies and making the necessary CIS dedcutions. Gangleader 1 will need to register with HMRC as a "contractor", not just as a "subcontractor" and will have to complete monthly CIS returns - I believe the penalties for not registereing as a "contractor" have now been capped but it is something HMRC are quite hot on and used to levy extremely harsh penalties on.

The Gangleader also seems to have a bit of a rough deal as HMRC could argue that the subbies he pays are his employees and run an employment status argument on him instead of the client (regardless or whether he incorporates). Less likely but also possible is a challenge under s.44 ITEPA 2003 in which HMRC could argue that he is simply supplying people to the end client and therefore obliged to operate PAYE and NI. Most HMRC inspectors wouldn't go down this route but I have seen it done before.

 

Thanks (1)
Share this content