Construction Accountants

The Construction Industry Scheme (CIS) encompasses a broad spectrum of construction work, including but not limited to plumbing, roofing, plastering, electrical, and general building tasks. If you’re a contractor or a self-employed individual immersed in the construction realm, CIS is a term you’ll become well-acquainted with. It’s mandatory to register for the scheme, ensuring that the appropriate payments are seamlessly made to HMRC.

For subcontractors, the landscape is a bit different. Registration for CIS isn’t a must, but there’s a catch – if you opt not to register, deductions from your payments are taken at a higher rate. It’s a bit like paying a premium for not having that CIS badge on your financial profile.

Each month, contractors need to submit an online return to HMRC. It’s a quick check-in to confirm the employment status of subcontractors and ensure the verification process is up to speed.

You’ll also be required share details of payments and any tax deductions made. This is due 14 days after each tax month (6th to the 5th of the next month).

No payments made to subcontractors? No problem, just file a nil submission. However, if you miss a deadline and there’s a £100 penalty, but with us by your side, you’ll always be on track and in the clear.

In the world of construction, understanding the roles of contractors and subcontractors is key. Contractors are often the big players – think construction companies, building firms, and even government departments and local authorities. If a business is splashing out more than £1 million a year on construction, it steps into the shoes of a contractor under the CIS.

On the flip side, subcontractors are the businesses that roll up their sleeves and get to work for contractors. It’s a hands-on role that’s all about execution. However, many businesses wear both hats. They juggle roles as both contractors and subcontractors, navigating the complexities of each to deliver top-notch construction projects.

At Simon & Co, we’re here to help you understand these roles and ensure that whether you’re contracting or subcontracting, your financials are as solid as the structures you build.

When subcontractors and contractors enter into a contract, subcontractors need to provide their name, unique taxpayer reference, and national insurance number, or if they’re a company, their registration number.

This isn’t just a formality; it’s a crucial step to ensure that the subcontractor is genuinely self-employed. Once the contractor gives the green light and is satisfied with the subcontractor’s status, it’s time to step into the ‘verification’ phase. It’s a straightforward process designed to keep everything transparent and above board, ensuring both parties are on the same page from day one.

We’re here to guide you through every step, making the identification and verification process as smooth as a well-laid foundation.

It’s essential to determine whether a subcontractor is employed or self-employed, and it’s not always black and white. HMRC leans towards classifying workers as employed to optimize tax and NI contributions collection. The worker’s status isn’t a choice but is defined by the engagement’s nature between the contractor and subcontractor.

Several factors come into play, including control over the work, whether a personal service is provided, equipment provision, payment basis, integration into the organization, parties’ intentions, mutual obligations, and financial risk.

HMRC provides an employment status indicator tool online, but caution is advised. It tends to lean towards classifying subcontractors as employees, so it’s not a definitive resource.

Under CIS, contractors must declare monthly that they’ve assessed their subcontractors’ status and confirm none are employees. Failing to provide accurate information can lead to penalties up to £3,000. If you’re navigating this complex area, Simon & Co is here to provide clarity and support, ensuring you’re always on solid ground.

When a contractor brings a subcontractor on board, they are required to verify subcontractors to determine the correct tax deduction rate – 20%, 30%, or no deductions for gross payments.

This obligation ensures that the tax withheld aligns with the subcontractor’s status. The verification process is conducted online, making it efficient and straightforward. At Simon & Co, we offer support by managing this process on your behalf or assisting you in handling it independently, ensuring accuracy and compliance.

Every month, contractors are tasked with providing subcontractors a detailed statement. It breaks down the total payments made and any tax deductions applied. It’s not just about transparency but also about compliance, ensuring that every penny is accounted for.

The tax deducted isn’t just recorded; it’s remitted to HMRC monthly. At Simon & Co, we streamline this for you. We’ll email you the details of the amount to be paid and guide you on the payment process. Our specialist software crafts these detailed statements, ensuring accuracy and compliance.

Prefer a hands-on approach? We’ve got you covered. We can equip you with the tools and support to manage this yourself, offering guidance on a consultancy basis to ensure you’re always confident and compliant.

Gross payment status can be a game-changer for contractors. We often recommend our clients to consider applying for it with HMRC. Why? Because it allows you to receive payments without any CIS tax deductions. It simplifies tracking your payments and ensures that you’re fully compensated for your work.

However, there’s a small catch. With the gross payment status, the responsibility to set aside funds for your tax bills falls squarely on your shoulders. If you’re accustomed to CIS tax being automatically deducted, this shift requires a bit of adjustment.

WWe can evaluate your eligibility for the gross payment status and guide you through the application process, ensuring that you’re well-prepared to manage your tax obligations efficiently.