Accountants need to be aware of the Construction Industry Scheme (CIS) rules and be able to advise clients already trading in these areas, or considering trading, or that have started without asking first.
In a new CIS guide for accountants, produced in association with Sage, Construction Industry Scheme writer Howard Royse runs through the basics of the scheme, who operates it and how best to deal with HMRC.
Tax payments and penalties await those unaware of the scheme, as do PI claims, Royse warned. But he added that accountants can do good work for their clients by staying in touch and being aware of their investments and proposals.
Individuals often have the idea of buying a property, doing it up and selling it, and considering this a capital gains tax matter for which there are useful exemptions and reliefs.
“More fundamental work on a property may involve a CIS registration. If an office block is purchased, the conversion to flats would be regarded as a construction activity as the investor has then become a developer,” he said. “Make no mistake, this would be trading in property and a CIS matter – unless an agent is commissioned to manage the project. That could exempt the purchaser from any registration,” Royse warned.
While the workings of payroll are widely known among accounting and administrative staff, Royse also warned that the procedures of CIS are not the same. It is important to help your construction clients ensure that the person or people involved in its management are fully conversant with how it operates.
According to Royse, accountants with clients involved in this area, or those tangential to it, need to be aware of CIS.
“No other industry is regulated for tax like construction,” he said, “As well as regulations, there are some very harsh penalties, and the tax tribunals have constantly rebutted claims of disproportionality.”
Download the full CIS guide for accountants, which features advice on deduction of tax, monthly returns, proof of deduction and payments to HMRC, written by Howard Royse.