CIS - Unfair and Criminal

[ready2mix]

Everybody seems to harp on about employment law being the obstacle to business growth, well that's not the case in my small business world. The impediment to growth and investment is the CIS scheme.

Bureaucratic and idiotic.

I currently have to prove to HMRC that i have paid all my deductions of 20%.

I don't get this gross amount its deducted and payed to HMRC by other.
I don't choose this method of payment I would rather be gross that would help with cash flow.
I cant make the contractor pay or provide me with a statement.
Its not even my money any more its HMRC.
I don't even have the main contractors returns HMRC do.
If the contractor has not paid my contribution hes effectively stole it from HMRC.

Why does all this matter? well when i am trying to get my tax rebate, i cant because there is now a 3rd party involved in collecting my tax , recording the fact i paid it and finally making the payment of my tax.

Now why not go gross, loved to but another form another list of requirements.

Any wonder businesses fail daily its because HMRC kills them with its rules, parliament allows it and government make the stupid rules.

 

[crossdaz]

Any wonder businesses fail daily its because HMRC kills them with its rules, parliament allows it and government make the stupid rules.

Once upon a time even a new one man band could get gross payment. It wasn't the revenue or the government that screwed it.

Sympathise with your predicament, the CIS scheme is a bummer but that's how it is. Nothing you can do about it.

 

[Tej]

Everybody seems to harp on about employment law being the obstacle to business growth, well that's not the case in my small business world. The impediment to growth and investment is the CIS scheme.

Bureaucratic and idiotic.

I currently have to prove to HMRC that i have paid all my deductions of 20%.

I don't get this gross amount its deducted and payed to HMRC by other.
I don't choose this method of payment I would rather be gross that would help with cash flow.
I cant make the contractor pay or provide me with a statement.
Its not even my money any more its HMRC.
I don't even have the main contractors returns HMRC do.
If the contractor has not paid my contribution hes effectively stole it from HMRC.

Why does all this matter? well when i am trying to get my tax rebate, i cant because there is now a 3rd party involved in collecting my tax , recording the fact i paid it and finally making the payment of my tax.

Now why not go gross, loved to but another form another list of requirements.

Any wonder businesses fail daily its because HMRC kills them with its rules, parliament allows it and government make the stupid rules.

The main contractor has to provide you with CIS deduction statements every month. effectively dayed 19th of the month, as that is when he has to pay HMRC the amounts that he has deducted fromn you.

If he does not provide these, then you should advise HMRC all his details. They will then give the main contractor a hard time for not submitting the returns to HMRC on time. ( They probably do this automatically and fine him even if the returns are 1 day late).

You can claim your witheld tax amount automatically when you submit your PAYE returns every month. just deduct the amount of tax witheld from the amount you have to pay HMRC.

Seems an easy enough process... as long as its done on time.

(I have never been fortunate to be in a position to claim a rebate... perhaps that is something you should discuss with HMRC)

 

[Consistency]

CIS Scheme - what is this?

 

[ready2mix]

Construction Industry Scheme, were deductions for self employed people and construction related ltd companies have TAX deducted from the company invoice.

This is collected by the 3rd party (Invoiced company or my customer) and sent (supposedly to HMRC every month) then whilst HMRC hold on to construction companys cash flow unlike any other LTD company for the year we then have to prove we paid the tax to the 3rd party.

We also have to claim the 20% tax back on expense. Although we can put material cost down which then are except from the tax deduction until end of year accounts. no other company has to declare its materials cost to its customers.

 

[ready2mix]

The main contractor has to provide you with CIS deduction statements every month. effectively dayed 19th of the month, as that is when he has to pay HMRC the amounts that he has deducted fromn you.

If he does not provide these, then you should advise HMRC all his details. They will then give the main contractor a hard time for not submitting the returns to HMRC on time. ( They probably do this automatically and fine him even if the returns are 1 day late).

You can claim your witheld tax amount automatically when you submit your PAYE returns every month. just deduct the amount of tax witheld from the amount you have to pay HMRC.

Seems an easy enough process... as long as its done on time.

(I have never been fortunate to be in a position to claim a rebate... perhaps that is something you should discuss with HMRC)

I think easy is not the right word, 6 telephone numbers 10 people at HMRC and nearly 2 hours on the phone passed around twice back to same departments until i said stop.

Simply there is no need for this system, why should i be penalized as a company above any other company not working in the construction industry.

 

[MrPAYE]

Simply there is no need for this system, why should i be penalized as a company above any other company not working in the construction industry.

For the simple reason that HMRC knows that tax avoidance/evasion/fraud has been rife within the sector for many years and they see CIS as maybe not an answer to all the problems but something that at least helps to keep many contractors and subbies on the radar.

It is a case of everyone in the sector being tarred with the same brush but that's the way it is - blame your colleagues not HMRC.

 

[maxine]

Why can't you get a Statement?

Are you invoicing the contractor? if so, then your invoices will presumably show the deductions?

If the contractor doesnt pay HMRC then that is HMRC's problem not yours provided you have invoiced correctly so not sure what the problem is regarding deductions.

I admit it's a rotten scheme as there is the CIS world then there is the real world!

 

[MyAccountantOnline]

i am trying to get my tax rebate, i cant because there is now a 3rd party involved in collecting my tax ...

I understand where you are coming from. What's actually stopping you getting a refund though? You can still complete your tax return showing the tax deducted.

 

[villabadger]

It is a case of everyone in the sector being tarred with the same brush but that's the way it is - blame your colleagues not HMRC.

Sorry, the blame lies clearly with HMRC and their wonderful rules. The reasons for the existance of this scheme are very outdated and really no longer apply. Construction Companies have to jump through the same hoops as every other business for taxation, health and safety, finance, insurance, employment etc etc... In my experience the 'cash in hand' coulture does not exist in the 'commercial' construction industry and business transactions are as legitimate as any other industry. The CIS scheme only applies to income from commercial (business to business) activities and excludes 'private' work. Yet it is the private work that potentially allows the opportunity for abuse - income not declared, tax avoided etc.

To the OP - I am in the same boat as you. Having run businesses outside the construction arena, I hate the way that my current business is penalised by the ridiculous rules for CIS. It completes screws up your cashflow during the year and then you have to apply to the HMRC clowns to have your cash returned! All you need is a contractor or 2 to decide not to pay you promptly (or at all), or a customer to go into Administration and you can find yourself completely in the smelly stuff! I really can't see how construction companies can still be discriminated against in such a way.

While I'm on the soapbox.....if you happen to have a siginifcant turnover (over £80kish) then you can get screwed by the CITB charges - brilliant!

 

[MyAccountantOnline]

Yet it is the private work that potentially allows the opportunity for abuse - income not declared, tax avoided etc.

I couldnt agree more - its such a time consuming exercise for all those who have to deal with CIS.

 

[Bernie01]

I hear you on the CITB, it is disgusting! CIS is a pain too, from our point of view, we pay our subbies their invoices and if we don't submit a return and pay up by the 19th of the month, WE are in the proverbial, not the subbies. My understanding is that the responsibility lies with us in every way. Our subbies get monthly statements and claim at the end of the year. If we were not paying, there would be nothing to stop them reporting us and us having to pay up. You are having your tax deducted, so you are paying, it's your main contractor's fault if they don't pay up, HMRC will be after them.

The scheme is awful, time consuming and very rigid!

 

[MrPAYE]

The reasons for the existance of this scheme are very outdated and really no longer apply. ... In my experience the 'cash in hand' coulture does not exist in the 'commercial' construction industry and business transactions are as legitimate as any other industry.

Ermmm, wrong. Unbelievably, I still see many cases of what can only be described as fraudulent practices in the sector, including by businesses who ought to know better. I'm sure HMRC come across the same on their travels.

I'm not saying that CIS is great or that it does not discriminate but there is plenty evidence from the early 70s to the current date that suggests something is still needed.

HMRC's view is probably that if CIS were to be abolished, then it would be back to the days where labour only subbies would flit from site to site receiving gross payments and never declare their earnings or even be visible to HMRC.

 

[villabadger]

Ermmm, wrong. Unbelievably, I still see many cases of what can only be described as fraudulent practices in the sector, including by businesses who ought to know better. I'm sure HMRC come across the same on their travels.

I'm not saying that CIS is great or that it does not discriminate but there is plenty evidence from the early 70s to the current date that suggests something is still needed.

HMRC's view is probably that if CIS were to be abolished, then it would be back to the days where labour only subbies would flit from site to site receiving gross payments and never declare their earnings or even be visible to HMRC.

In your opinion I may be wrong. However, in my experience, I have not been party to, or been aware of, anything underhand.

I do take your point in the final paragraph but there are lots of other systems now in place to ensure that individuals and companies are employed legitimately and safely on site. Of course, this won't necessarily ensure that they will account for their income and tax affairs correctly but then how is this different to any other business? I could be self employed in any other industry and nothing will force me to correctly declare my income. I could run a business which exists on mainly cash transactions - who knows how much I actually declare? I could go on.......

My point is that what made the construction industry unique in the past could be applied to any number of different industries today.

 

[MrPAYE]

My point is that what made the construction industry unique in the past could be applied to any number of different industries today.

This is so very true....and which is where I think HMRC are going.

You will be aware of the consultation 'False Self Employment in Construction' which was out last year aimed at tackling once and for all the vague tax rules allowing so many subbies to be self employed, many incorrectly.

Although this has currently gone quiet it has not gone away (see blog post http://www.optimumpaye.co.uk/blog/2...-self-employment-proposals-have-not-gone-away )and my view is that once this is actually introduced for the construction sector, something similar will be brought in for everyone else as employment status is one of the biggest PAYE related problems for HMRC to deal with.

Obviously if subbies have to be paid under PAYE the issue of CIS becomes less so as it only relates to self employed subbies.

 

[villabadger]

This is so very true....and which is where I think HMRC are going.

You will be aware of the consultation 'False Self Employment in Construction' which was out last year aimed at tackling once and for all the vague tax rules allowing so many subbies to be self employed, many incorrectly.

Obviously if subbies have to be paid under PAYE the issue of CIS becomes less so as it only relates to self employed subbies.

Thanks for the link. This is frequently a discussion topic with my accountant in which we try to keep a step ahead of hmrc. Thankfully, he has successfully defended other clients/businesses when employment status has been questioned. So, he can help keep us above board.

Until there is real stability within construction I can't see how changing subbies to permanent employees would work. Over the last year we employed the services of subbies on an average of about 6 a week, with a swing up to 15 down to none (this week). I'd be intrigued to hear how hmrc would prevent companies from employing, dismissing then re-hiring people. Maybe they would except a fixed term contract for 1,3 or 6 months? Who knows?

 

[maxine]

If you use subbies regularly then possibly you may consider Zero Hours Contracts where they are employees on payroll instead but with variable hours. It does need looking at carefully though but has benefits of being in control as an employer

 

[villabadger]

If you use subbies regularly then possibly you may consider Zero Hours Contracts where they are employees on payroll instead but with variable hours. It does need looking at carefully though but has benefits of being in control as an employer

Thanks for that. This type of contract raises lots of other questions though....if a subbie works for 5 or 6 different companies, would he (or she) need to have this type of contract with each company? etc etc..

For us, this would add further to our woes as we sometimes have to find subbies who are local to the work (site) and we might only use them once. However, for the guys that do work frequently for us this might work.

 

[ready2mix]

I have tried to contact HMRC 6 numbers, 10 people and 2 hours on the phone passed pillar to post, no wonder my accountant wished me luck.

If HMRC was a buisness it would be bankrupt its service is a mess its cutomer service departments are dismal, worst ever experienced.

One thing i am not a self employed builder we are a registered ltd company, i understand the difficulties that HMRC had trying to collect revenue, but a legitimate registered company having to pay its tax directly on invoice, no other company has to do this its unfair and should not be tolerated any more.

I have also written to

Vince cable
George Osborn
PM
Nick Clegg

if i just moan and role over nothing will change, I am waiting for a response from any of those above and will then start to put a case for the Federation Small Business hopefully to lobby parliament.

Would you consider putting your voice to the coarse.

 

[villabadger]

I have tried to contact HMRC 6 numbers, 10 people and 2 hours on the phone passed pillar to post, no wonder my accountant wished me luck.

If HMRC was a buisness it would be bankrupt its service is a mess its cutomer service departments are dismal, worst ever experienced.

One thing i am not a self employed builder we are a registered ltd company, i understand the difficulties that HMRC had trying to collect revenue, but a legitimate registered company having to pay its tax directly on invoice, no other company has to do this its unfair and should not be tolerated any more.

I have also written to

Vince cable
George Osborn
PM
Nick Clegg

if i just moan and role over nothing will change, I am waiting for a response from any of those above and will then start to put a case for the Federation Small Business hopefully to lobby parliament.

Would you consider putting your voice to the coarse.

I agree with you 100%

At various times, I have had to deal with HMRC for VAT, CIS and Corp Tax queries and the process has always been the same - absolutely appalling!! Pushed around to different departments who point you back to the same person you had previously called!

I always leave paying the VAT bill till very late in the day and usually get a little default reminder and the threat of having to pay a fine. Yet, they still owe me £4k from last years P35 return, let alone what they owe me for this years which is over £20k.

The best thing is the way some of them try to talk down to you as if you have been a naughty little schoolboy. I had to beg them for terms to pay my Corp Tax due to c**p cashflow - Hello! If you paid me my cash I time I wouldn't have a cashflow problem!!!!!

HMRC always claim the high ground when, in fact, most of the people you have to deal with haven't got a clue. I couldn't be an accountant and have to deal with these people every day. Rant over.

 

[ready2mix]

I agree with you 100%

At various times, I have had to deal with HMRC for VAT, CIS and Corp Tax queries and the process has always been the same - absolutely appalling!! Pushed around to different departments who point you back to the same person you had previously called!


HMRC always claim the high ground when, in fact, most of the people you have to deal with haven't got a clue. I couldn't be an accountant and have to deal with these people every day. Rant over.

i am going to say that's not a rant its an expression of frustration and anger because of the stonewalling of the HMRC staff.

They keep saying publicity that its employment legislation in the way of progress, that might be so, but its not for me its HMRC, government attitude to banks and the flow of money.

 

[ready2mix]

For the simple reason that HMRC knows that tax avoidance/evasion/fraud has been rife within the sector for many years and they see CIS as maybe not an answer to all the problems but something that at least helps to keep many contractors and subbies on the radar.

It is a case of everyone in the sector being tarred with the same brush but that's the way it is - blame your colleagues not HMRC.

On the radar, i have to file annual accounts as a limited company. To quilify for gross I have to undertake an interview and then get permision from HMRC, hello i dont work for them, they work for me and every tax paying company and person in the country.

So now i am guilty of tax evasion even before i started trading, just because i belong to the construction industry? there has to be a better way.

If i work for a member of the public i charge them gross, i could generate 80% or my revenue from private jobs and charge gross, but soon as i work for any major LTD or PLC they have to collect my tax. What is the difference between me and any other limited company?

 

[vvaannmmaann]

Was anyone else expecting a story about The Naval Criminal Investigative Service?

 

[thebigIAM]

I don't work in construction and don't quite understand what is happening here. However, please do keep up your campaign to inform politicians about your difficulties.

It's a drip drip drip solution, but at the end of the day it's best we've got.

 

[ready2mix]

Was anyone else expecting a story about The Naval Criminal Investigative Service?

Is that the NCIS ?

NCIS - CIS = N

maybe they would if the if the letters actually represented NCIS if they were written NCIS but they represent CIS and the HMRC which dos not stand for "Her Mothers Reclining Chair".