A new carpenter sole trader came my way in January 20.
His initial plan was to work on his own for private householders only completing small jobs as he is semi retired. All roles prior to this have been employed (mainly MOD as ships carpenter) so this is new to him. We went through the CIS scheme so he has been made aware of it.
His records show that he has undertaken some larger jobs involving domestic kitchen refits and he has used self employed electricians and plumbers for relevant work (new sockets, replace consumer units, install taps etc).
My reading of www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cis... is that this work is outside of CIS so my client was not required to register as a contractor. Correct?
If my client was to use a subcontract kitchen fitter this would fall with CIS - correct?
My advice has been consider all use of labour carefully and to ask any other trades used to contract direct with the householder to avoid CIS risks. Importantly, I have reminded him to request advice at the time and not after the event!
Replies (27)
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If my reading of your query is correct, your client is a contractor but not a subcontractor. If he has paid any of the subcontractors he has engaged as a contractor, then he should have deducted tax.
If my reading of your query is correct, your client is a contractor but not a subcontractor. If he has paid any of the subcontractors he has engaged as a contractor, then he should have deducted tax.
Agreed, also do you need to file SAR? As there may be a loss of tax if the subbies do not declare this income.
Agreed, also do you need to file SAR? As there may be a loss of tax if the subbies do not declare this income.
Absolutely not.
What evidence can you have that the subbie will not include this in his income?
It falls into the category of "making stuff up".
Thanks for the reply.
But, in this case where an electrician is used on a subcontract basis to move a few light sockets, I read it as this is not 'construction work' i.e. covered by extending existing systems www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cis...
Extending Existing Systems
As mentioned above only the installation of building systems is within CIS. As with repairs, extensions to systems will similarly be excluded, this could be for example, the addition of an extra radiator to a central heating system, or the wiring of additional electrical plug sockets.Where a building has been extended by the addition of further floors above or rooms to the side, the extension work will be a construction operation caught by the scheme under FA04/S74 (2)(a). Any system extensions carried out as part of the same contract to extend a building or structure will also be caught as part of a mixed contract.
Have I misunderstood this (very possible!)?
What you say sounds plausible, yet all the kitchen fitters I know, subcontracting to Wickes, Magnet et al, get tax deducted at source.
Depends whether you want to win a protracted argument with HMRC or just not have the argument in the first place
Agree Lion
The biggies all use CIS, New kitchens and cupboards type people
WHY DO THEY DO IT?
The biggies all use CIS, New kitchens and cupboards type people
WHY DO THEY DO IT?
Could be a bit like IR35 - too scared not to.
Cost is just admin. Subbie gets a payment on account.
No issues and no need to look at grey wording that HMRC read one way and other differently
Admin is trivial if trader is organised
I agree with CWservice6064. Get other trades to invoice directly.
Also to keep turnover below £85K get materials invoiced to householder.
I my area one of the builders merchants runs a system where the householder opens an account and authorises his builder to purchase on that account.
For an tradesman going self employed at the end of his working life getting involved with CIS and VAT is a step to far for most.
Edit as Jane beat my reply
Agree both (but not JANE)
Your client is a contractor
Register soonest
Chances are all subbies are already registered as subbies
Depends how much is involved but I'd probably gloss over the past and look to getting the future right.
Obviously, if HMRC come along and ask for the tax he ought to have deducted, he doesn't have a leg to stand on.
Concur
Move forward the right way, not looking to avoid the CIS system
If my kitchen fitter asked me to go and buy the kitchen, he then collects, I would see that as good
But if he wanted my to pay three other tradesmen, then knock off the agreed fee I would look askance and think unprofessional, and is he looking to avoid resolving problems that the others create.
I would also be asking if he carried defective insurance cover on the trades he cannot do
Edit
Who do I complain to when the plugs fail and the gas blows up?
All three pointing at the others
Concur
Move forward the right way, not looking to avoid the CIS system
If my kitchen fitter asked me to go and buy the kitchen, he then collects, I would see that as good
But if he wanted my to pay three other tradesmen, then knock off the agreed fee I would look askance and think unprofessional, and is he looking to avoid resolving problems that the others create.
I would also be asking if he carried defective insurance cover on the trades he cannot do
Agree, Paul. You could end up creating problems rather than solving them.
Worth pointing out that, whilst VAT might affect your profitability, CIS does not. There are just a few forms to fill in.
I called the CIS helpline with the specifics (no mention of client!) and they suggested that the work done by the subcontractor was not within CIS and that it would be wrong to withold tax on this basis. She referred to CIS340 as 'the Bible'.....festive.
The Bible's not all about Christmas.
It does not even say:
Jesus born in a stable
How many Magi ( just three gifts )
That could be for all seven of them
It does not even say:
Jesus born in a stable
How many Magi ( just three gifts )
That could be for all seven of them
Massacre of the Innocents - not mentioned in any secular records.
Even worse
No reason to go to Bethlehem as no census.
No mention of Mary on a donkey, but it is a possibility
Never rely on what HMRC say, although I must admit the CIS helpline is usually pretty good, I think you need to look at it that the work is all part of the kitchen installation so would mean all of the works would fall within CIS (Appendix C1), if the works were unrelated to the kitchen installation then I believe you may have a case.
But as you say you can do more than put it right moving forwards.
You need to decide whether it is part of the kitchen installation work, if an electrician fits a new socket for a dishwasher then it is part of the kitchen installation, if a plumber moves pipework to the other side of the kitchen it is part of the kitchen installation, as you said in the OP all the works are associated with the fit so I believe all will fall within CIS.
Your client has a contract with the homeowner to install a kitchen and I assume all associated work as in electrics and plumbing, this therefore makes him a contractor, your client can not complete these works himself and therefore needs to engage the services of sub-contractors to complete the kitchen installation so these works are all part of the same contract.
If the electrician was moving a socket in an upstairs bedroom then I believe you may be able to argue that it is not within CIS.
My advice would be to make sure your client has invoices for any work that the subbies carried out and move on, as said up thread all HMRC are interested in is making sure all the correct tax has been paid.
I would agree with your advice. If your client starts working as a project manager, there are other complex issues to deal with, not least of which are CDM regulations, building control and increased liability. It's one thing asking a mate to move a couple of sockets or change some taps and bill the customer directly, it's a whole other world subcontracting people to replace distribution boards or heating systems. Of course, if that is what your client wants to do, he needs to change his mindset from being semi-retired.