The CIS lays down rules that contractors must follow when hiring sub-contractors to work in the construction industry. HMRC have set out rules meaning a contractor must assess the subcontractor’s employment status before making payments to them. If they deem the sub-contractor to be self-employed then they may have to deduct CIS tax from the payment depending on the sub-contractor’s payment status.
Are you a Contractor or a Subcontractor?
When considering CIS it is important to define exactly what is meant by a contractor and a sub-contractor as these have specific meaning that is different to their general meaning. There are different rules under CIS for both a contractor and a sub-contractor.
CIS and Sub-Contractors
As a sub-contractor you will need to hold certain insurances in order to protect yourself and meet the contractual requirements of contractors and customers. Rhino provides you with instant low-cost insurances that meet this need, including Public Liability Insurance and add on products that protect your tools and plant.
In addition, as a sub-contractor it is important that you can demonstrate to HM Revenue & Customs (HMRC) that you are genuinely self-employed. If you cannot then HMRC can re-classify you as an employee and subject your payments to PAYE, even if you are having 20% CIS tax deducted. This will mean you have to pay an additional 12% National Insurance. Your contractor may have to reduce your rates to remain competitive as he will have to pay 13.8% national insurance.
Purchasing Public Liability insurance in your own right helps to demonstrate to HMRC that you are genuinely self-employed, in addition through Rhino you can obtain Contract Reviews to make sure your contracts are defendable in the event of challenge by HMRC and finally you can purchase Tax Enquiry Insurance that will cover costs incurred by our experts in the event that you are subject to enquiry by HMRC.
In addition, as a Policyholder you will have access to our business support lines, where you can access expert advice on employment law, health & safety, legal and tax issues that your business may encounter.
CIS Compliance Review (for contractors)
One of our consultants will spend a day with you (or the equivalent amount of time remotely) and undertake a detailed CIS review which will ensure that you are operating CIS correctly and where you are not will provide specific recommendations and actions in order to bring you up to the required standard.
CIS Contract Review
In order to demonstrate that sub-contractors are not in fact employees it is essential that you have an up to date Contract for Services in place, signed by both parties. In addition, having a professional review of the contract is an excellent way of ensuring that as a sub-contractor you are genuinely self-employed and avoid being re-classified as an employee. As a contractor you should also be ensuring that all of your sub-contractor contracts are fully compliant as ultimately you could become liable to PAYE, National Insurance, interest and penalties if your sub-contractors are reclassified as employees.
One of our experienced consultants will review the contract and where the contract fails highlight amendments and clauses that can be added to the contract. In addition, we will happily re-assess the contract once the amendments have been made. Standard turn around is 5 days.