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CIS set off

CIS set off

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Is it possible to set off CIS income tax deducted by main contractor against CIS income tax deducted from sub-contractors in the monthly return if not operating through a limited company? HMRC guidance suggests not so this seems to create a cash flow problem until a self assessment return is filed. Advice would be appreciated.

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Euan's picture
By Euan MacLennan
30th Jul 2013 10:29

No

... but why do you think it is a cash flow problem?

The sole trader sub-contractor is having income tax deducted from his income in the same way that employees have income tax deducted under PAYE, leaving a comparatively small balance to pay or to be refunded under self-assessment.  The CIS tax which he deducts from his own subbies is not his tax - it is his subbies' tax and he has no right to fund his business by holding onto their tax.

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By stratty
30th Jul 2013 11:17

Cash Flow

Obviously it impacts on cashflow during the tax year.

Had a similar situation with an LLP that have to pay across £130k in subbies tax during the tax year and then reclaim £160k under Self Assessment.

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Replying to bookmarklee:
Euan's picture
By Euan MacLennan
30th Jul 2013 11:40

Yes - you're right

stratty wrote:

Obviously it impacts on cashflow during the tax year.

Had a similar situation with an LLP that have to pay across £130k in subbies tax during the tax year and then reclaim £160k under Self Assessment.

I was thinking that a sole trader would be doing most of the work himself and occasionally using subbies for the work in which he was not himself skilled, but there is no reason why a sole trader should not be effectively a gang master using lots of subbies and hence, having lots of expense to reduce his taxable profits, thus resulting in a refund of the tax based on his sales.

Only allowing limited companies to set off CIS suffered against PAYE is arbitrary.  It would be more logical to allow the set off to anyone who has a PAYE scheme for either employees or sub-contractors.

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By stratty
30th Jul 2013 12:17

Absolutely

I recently had this argument with HMRC Euan.  It makes no logical sense.

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