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CIS…what to do now?

CIS paid to me, but I’m not registered?!

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Hi

I've been doing work for a client of mine and he's been deducting 20% tax. We both were under the illusion that I was CIS registered, but my precious company was CIS registered, but not this one. I wasn't aware until now. 
 

He now wants me to pay back 10% of all invoices, so I would just like to know what my options are?
 

I want to do everything right, but not sure I'll be able to afford paying back everything at this moment due to the knock I took during COVID.

Any advice would be MUCH appreciated.

Thanks 

Replies (21)

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By doubletrouble
30th Sep 2021 21:59

The Contractor you have been working for should have verified you with HMRC before paying you, if they had done this it would have came back as ‘unknown’ and they would have had to deduct tax from you at 30% so this is their problem.
Best thing to do now is get registered so future deductions are at the 20% rate.
How long has this been going on for? It can not have been for long bearing in mind the Contractor needs to submit monthly CIS returns

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Replying to doubletrouble:
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By FrankO79
01st Oct 2021 07:59

Thanks for getting in touch.

The contractor have been dealing with me since July last year and have also been paying me since then.

If I understand you correctly, legally I don't need to pay back anything, because it is their mistake?

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Replying to FrankO79:
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By doubletrouble
01st Oct 2021 08:12

It is the Contractors fault as they should have verified you before paying you, if this has been going on since last July I would be more concerned with where the 20% they have been deducting has gone as this problem of not being verified should have shown up before the contractor submitted the monthly CIS returns, have you been getting monthly deduction statements off the contractor to show your payments and are they in your correct UTR number?

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Replying to FrankO79:
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By SXGuy
01st Oct 2021 12:46

Just so you're aware, you can't submit a contractor cis return without verifying each sub contractor. So as already mentioned. I'd be concerned with where your tax payments have gone and whether the contractor knows what they are doing.

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Replying to SXGuy:
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By FrankO79
01st Oct 2021 12:55

That does make me wonder. I will take it up with my contractor for sure.

Thanks again for the free advice and guidance.

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By Leywood
30th Sep 2021 23:00

Why are you not putting this question to your existing Accountants?

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Replying to Leywood:
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By FrankO79
01st Oct 2021 08:01

I have and will be hearing from him today, but I thought it couldn't hurt asking someone else for some advice.

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Replying to FrankO79:
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By Truthsayer
01st Oct 2021 11:26

It WILL hurt to ask others for advice, as we don't know the full facts. There are all kinds of important details that you have not stated. Therefore, assuming he is competent and properly qualified, you should follow what your accountant recommends, and not what we say here.

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Replying to Truthsayer:
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By Tax Dragon
01st Oct 2021 11:45

That's true.

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Replying to Truthsayer:
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By Leywood
01st Oct 2021 12:25

[quote=Truthsayer] ''It WILL hurt to ask others for advice, as we don't know the full facts.''

Exactly.

Would also stop all the questions and guessing games now going on that are trying to find out the full facts.

Worse, now OP thinks its ok to ignore the 20% already deducted, which may not have reached his record at HMRC. Oh dear.

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Stepurhan
By stepurhan
01st Oct 2021 06:36

Your options are take paid for bespoke advice, maybe from the accountancy firm your accounts indicate you have engaged.

The contractor is the main one with the problem, because they are required to verify to deduct the correct tax in the first place. He doesn't have any legal recourse to claim back underdeducted tax from you. Whether agreeing to some arrangement because they are an important customer is another matter.

But your explanation is confusing. You talk about being under the impression that "I" was CIS registered, indicating you as an individual. Then you talk about a "precious company" that is registered. Then you say "but not this one". So is "I" you or another company?

If money is tight, perhaps running multiple companies (or indeed any companies) is not wise.

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Replying to stepurhan:
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By FrankO79
01st Oct 2021 08:11

Thanks for getting in touch.

I shouldn't have mentioned the previous company as it only confuses things. It was a short lived joint venture with a friend of mine which did work out in the end.

I do mostly maintenance work in commercial buildings and since covid I lost nearly all my clients. Having just build a house and building an extension plus our first baby on the way, money have starting getting low.

The contractor has been paying me since July 2020 and have only now flagged this issue with me. From reading your response, it is down to the contractor to make sure things are in order and I won't be liable for any repayments?

I do not work for the contractor anymore.

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By SXGuy
01st Oct 2021 07:02

He should have stopped 30% so prob why he wants an extra 10% off you.

Whether that's his issue or not I don't know as it's not really my area

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By cbp99
01st Oct 2021 10:45

Is it possible your previous company is still recognised by HMRC for CIS (at the 20% rate), and your contractor client verified that company? In which case a) the contractor has behaved correctly based on the information you provided, and b) the company may have a CIS credit on its HMRC account. To correct this, the contractor would need to amend all the CIS returns since last July so that they are recorded against you as sole trader, with a 30% deduction. Hence as has been said, the request for a further 10%. Youi will be able to offset the 30% for 2020-21 against your tax liability when you submit your SA. In the meantime, get yourself registered for CIS.

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Replying to cbp99:
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By David Ex
01st Oct 2021 11:00

cbp99 wrote:

Is it possible your previous company is still recognised by HMRC for CIS (at the 20% rate), and your contractor client verified that company?

Struck off in 2017.

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Replying to David Ex:
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By cbp99
01st Oct 2021 11:32

Thanks, but it does not follow that HMRC have closed the CIS registration.

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Replying to cbp99:
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By FrankO79
01st Oct 2021 12:37

The UTR provided to my contractor was the correct and current one.

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By lesley.barnes
01st Oct 2021 10:48

What is on your CIS certificates? It is the contractors responsibility to check that they are making the correct deductions. You didn't give them the UTR for the short lived venture that was registered for CIS did you rather than your new company?

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Replying to lesley.barnes:
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By FrankO79
01st Oct 2021 12:35

That is correct, I provided them with the correct UTR number.

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Replying to FrankO79:
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By doubletrouble
01st Oct 2021 13:37

So did you get monthly deduction statements from the Contractor?
If you have filed your 2020/2021 tax return did you include the tax deducted?

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RLI
By lionofludesch
02nd Oct 2021 07:53

CIS tax costs you nothing but cash flow.

In theory, it's just part of your sales that the contractor pays in to a piggy bank held by HMRC to settle you tax bills. Any excess is repaid to you. Eventually. HMRC are exceptionally busy with Covid (well, that's their current excuse - doesn't explain why they were so slow before March 2020).

Who's at fault? Both of you. You should've registered. He should have checked you were registered.

How much do you need his work?

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