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CIS: do I need to pay it as an agency?

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ToddJoiner

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Apr 5, 2019
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Hello everyone,

My question is to anyone who has experience with accounting in the construction industry, specifically with CIS.

I have recently started an agency for carpenters. Most of my work comes from other joinery companies.

As I am not gross payment exempt yet - I haven’t turned over 33k - I am in a situation where I am being deducted 20% tax on every invoice I issue. My problem with that is best explained in an example:

I charge £20 for a carpenter for 1 hour.

I receive £16 after the CIS deduction.

I owe £18 to the carpenter for the work.

Profit: £2

Tax paid: £4

So I’m hoping there’s going to be a big tax rebate due but it all seems a bit backwards and I’m worried I can’t grow the business unless I have the capital to cover the CIS.

Any help would be much appreciated.

Thanks!
 
Are you paying the carpenter under PAYE?
 
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ToddJoiner said:
No, sorry, I should’ve included that all the carpenters that I employ are self-employed.
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Then you deduct CIS from them. 20% if they are registered and 30% if not. You should have found all this out when you registered for CIS yourself.
 
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Newchodge said:
Then you deduct CIS from them. 20% if they are registered and 30% if not. You should have found all this out when you registered for CIS yourself.
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Thanks, I know to deduct their CIS and have been doing so. I'm assuming their CIS is a separate thing but I suppose when I do my first CIS statement it might all become clear.
 
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You offset one against the other. You will be registered both as a contractor (using construction industry sub-contractors) and as a sub-contractor. If you were just a contractor you would have to pay 3.60 per hour that you have collected for HMRC, but you have already paid 4.00 per hour as a subbie, so you will hve nothing to pay.
 
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As far as I am aware you can only offset the monthly CIS tax if you have a LTD Co, if not the contractor will deduct the 20% from you and then you must deduct a further 20% from your subbies and pay this to HMRC in your monthly returns until the end of the tax year when you should then receive a rebate.
 
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DWS said:
As far as I am aware you can only offset the monthly CIS tax if you have a LTD Co, if not the contractor will deduct the 20% from you and then you must deduct a further 20% from your subbies and pay this to HMRC in your monthly returns until the end of the tax year when you should then receive a rebate.
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What makes you think that?
 
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Because a sole trader or partnership has to wait until the end of the tax year to claim back any tax deducted.
Their invoices of gross amount will be turnover and the payments to the subbies will be cost of sales and then if they have paid more in CIS than the tax on their profits they will receive a rebate, they can not offset one against the other
 
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Can you point to anything in the CISegulations that supports this view?
 
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It is declared, as is CIS suffered. Are you suggesting that Ltd companies complete a different monthly CIS return?
 
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DWS said:
No same returns just Ltd Co can off set and sole traders and partnerships are not allowed to and can only claim CIS deducted through their SA
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I don't understand, if it is the same return, how it can be different?
 
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The return is not different, but to off set the deductions is
They will not let me post the link that shows that LTD can but sole traders can not
But have a look at HMRC form CIS132
Don't ask me why its not the same for sole traders, I don't know but it should be
 
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Are you sure you are not interpreting the rules for sub-contractors? Sole trader sub-contractors cannot offset or reclaim CIS deducted until they submit their self assessment, but that does not cover the position for sub-contractors who are also contractors.
 
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Cindy is right. There is no difference in treatment of CIS suffered and deducted between a Ltd company and a sole trader. The offsetting rule is identical, and is done via the RTI system. There are no different RTI requirements for sole trader or company.
 
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Actually, I stand corrected. unincorporated contactors explicitely do NOT include CIS suffered on EPS. Go figure.

Having said that, all of the CIS contractors I've dealt with since the introduction of RTI have been incorporated business, so I feel at least a little vindicated.
 
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SteLacca said:
Actually, I stand corrected. unincorporated contactors explicitely do NOT include CIS suffered on EPS. Go figure.

Having said that, all of the CIS contractors I've dealt with since the introduction of RTI have been incorporated business, so I feel at least a little vindicated.
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Does that appear to be an intention in the legislation or an unintended consequence of the way guidance is framed. I notice HMRC seem to use 'contractors' and 'companies' interchangeably.

As it stands, though, it would appear as if incorporation is the way forward for the OP.
 
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I suspect it's a way for this cynical Government to get a loan of hard working contractor/subcontractors.
 
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