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

Discussion in 'Cashflow forum' started by ToddJoiner, Apr 6, 2019.

  1. ToddJoiner

    ToddJoiner UKBF Newcomer Free Member

    4 0
    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!
     
    Posted: Apr 6, 2019 By: ToddJoiner Member since: Apr 5, 2019
    #1
  2. Newchodge

    Newchodge UKBF Big Shot Free Member

    12,834 3,349
    Are you paying the carpenter under PAYE?
     
    Posted: Apr 6, 2019 By: Newchodge Member since: Nov 8, 2012
    #2
  3. ToddJoiner

    ToddJoiner UKBF Newcomer Free Member

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    No, sorry, I should’ve included that all the carpenters that I employ are self-employed.
     
    Posted: Apr 6, 2019 By: ToddJoiner Member since: Apr 5, 2019
    #3
  4. DWS

    DWS UKBF Regular Free Member

    109 13
    How do you employ someone who’s self-employed?

    Do you deduct CIS from them?
     
    Posted: Apr 6, 2019 By: DWS Member since: Oct 26, 2018
    #4
  5. Newchodge

    Newchodge UKBF Big Shot Free Member

    12,834 3,349
    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.
     
    Posted: Apr 6, 2019 By: Newchodge Member since: Nov 8, 2012
    #5
  6. ToddJoiner

    ToddJoiner UKBF Newcomer Free Member

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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.
     
    Posted: Apr 8, 2019 By: ToddJoiner Member since: Apr 5, 2019
    #6
  7. Newchodge

    Newchodge UKBF Big Shot Free Member

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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.
     
    Posted: Apr 8, 2019 By: Newchodge Member since: Nov 8, 2012
    #7
  8. ToddJoiner

    ToddJoiner UKBF Newcomer Free Member

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    Exactly what I hoped would be the case. Thank you very much for your advice!
     
    Posted: Apr 8, 2019 By: ToddJoiner Member since: Apr 5, 2019
    #8
  9. DWS

    DWS UKBF Regular Free Member

    109 13
    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.
     
    Posted: Apr 8, 2019 By: DWS Member since: Oct 26, 2018
    #9
  10. Newchodge

    Newchodge UKBF Big Shot Free Member

    12,834 3,349
    What makes you think that?
     
    Posted: Apr 8, 2019 By: Newchodge Member since: Nov 8, 2012
    #10
  11. DWS

    DWS UKBF Regular Free Member

    109 13
    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
     
    Posted: Apr 8, 2019 By: DWS Member since: Oct 26, 2018
    #11
  12. Newchodge

    Newchodge UKBF Big Shot Free Member

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    Can you point to anything in the CISegulations that supports this view?
     
    Posted: Apr 8, 2019 By: Newchodge Member since: Nov 8, 2012
    #12
  13. DWS

    DWS UKBF Regular Free Member

    109 13
    More to the point
    Can you explain how the CIS tax that is deducted from the sub-contractors is not declared and paid to HMRC on the monthly return?
     
    Posted: Apr 8, 2019 By: DWS Member since: Oct 26, 2018
    #13
  14. Newchodge

    Newchodge UKBF Big Shot Free Member

    12,834 3,349
    It is declared, as is CIS suffered. Are you suggesting that Ltd companies complete a different monthly CIS return?
     
    Posted: Apr 8, 2019 By: Newchodge Member since: Nov 8, 2012
    #14
  15. DWS

    DWS UKBF Regular Free Member

    109 13
    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
     
    Posted: Apr 8, 2019 By: DWS Member since: Oct 26, 2018
    #15
  16. Newchodge

    Newchodge UKBF Big Shot Free Member

    12,834 3,349
    I don't understand, if it is the same return, how it can be different?
     
    Posted: Apr 8, 2019 By: Newchodge Member since: Nov 8, 2012
    #16
  17. DWS

    DWS UKBF Regular Free Member

    109 13
    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
     
    Posted: Apr 8, 2019 By: DWS Member since: Oct 26, 2018
    #17
  18. DWS

    DWS UKBF Regular Free Member

    109 13
    Search
    CIS pay tax and claim back deductions
    And then go to the Gov site
     
    Posted: Apr 8, 2019 By: DWS Member since: Oct 26, 2018
    #18
  19. Newchodge

    Newchodge UKBF Big Shot Free Member

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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.
     
    Posted: Apr 8, 2019 By: Newchodge Member since: Nov 8, 2012
    #19
  20. DWS

    DWS UKBF Regular Free Member

    109 13
    No, I believe that I have interpreted the rules correctly although I would be happy to be proved wrong if you could show any guidance that proves otherwise.
     
    Posted: Apr 9, 2019 By: DWS Member since: Oct 26, 2018
    #20