Factsheet – Construction Industry VAT – Reverse Charge Reply

 

Reverse Charge for the Construction Industry starts in October 2019, its complicated and will be confusing!

Read our 2 page fact sheet to understand how you need to account for VAT.

The new rules will affect Subcontractors and Contractors.

Click here to get the factsheet

steve@bicknells.net

Will CIS apply to my property ‘refurb’? do Landlords need to register? 1

Group of construction workers. House renovation.

Many small scale property developers don’t realise that the Construction Industry Scheme (CIS) applies to them.

HMRC are also looking very closely at Landlords (Investors) to see if they should register too…

Terrace Hill (Berkeley) Ltd v HMRC [2015] UKFTT 75 (TC) TC 04282

Until now property investment has been excluded from CIS but HMRC say this is under review

http://www.hmrc.gov.uk/manuals/cisrmanual/cisr12080.htm

For now let’s focus on Property Developers, here are a few facts:

  • Property development is a trade it includes building new buildings and improving or refurbing existing buildings
  • Property developers will be contractors because they employ subcontractors – bricklayer, carpenters, painters, electricians, plasterers etc
  • There is no lower limit below which you do not have to operate CIS
  • Subcontractors, especially Labour Only subcontractors need to have their employment status tested
  • Subcontractors need to be verified with HMRC to determine their tax status before they can be paid
  • Each month the Developer will need to file a return with HMRC of subcontractor deductions
  • Each month the subcontractors must be given a deduction statement
  • CIS applies to all types of Developer – Individuals, Partnerships and Companies

Failure to comply means big penalties

CIS Penalties

Here are some penalty horror stories!

Brian Parkinson a gardner and lanscaper who used occasional subcontractors and got £31,500 in CIS Penalties!

The FTT heard evidence that little or no loss of tax resulted from this omission, as the amount of tax Parkinson ought to have deducted under the CIS was put at £837.90. [Brian Parkinson and the Commissioners for Her Majesty’s Revenue & Customs TC04526; Appeal number: TC/2013/00224].
This comprised £6,000 (5 x the £1,200 maximum) charged under the Taxes Management Act 1970 (TMA 1970), s98A(2)(a) and also month 13 penalties of £25,500 charged under TMA 1970, s. 98A(2)(b). – See more at: https://www.accountancylive.com/partial-win-gardener-over-%E2%80%98excessive%E2%80%99-cis-penalties#sthash.zJA59Gjv.AfCNNGRJ.dpuf
Or how about CJS Eastern an installer of lightning conductors

INCOME TAX – subcontractors – appellant company contracted with a third party provider to supply “operatives” – third party provider “net” for CIS purposes – company’s failure to make CIS returns  – fixed monthly penalties of £28,500 – Month 13 penalties of £56,500 – whether reasonable excuse – held, no – whether disproportionate as a breach of A1P1 – Tribunal’s jurisdiction and interaction with mitigation –  Bosher followed – fixed penalties upheld – Month 13 penalties set aside as excessive – appeal allowed in part

https://cases.legal/lang-en/act-uk2-156151.html

If you’re a property developer make sure you register for CIS with HMRC!

If you need help contact us

steve@bicknells.net

 

 

Self Assessment Tips for Subcontractors 3

The construction industry has a large number of self employed subcontractors covering most trades, they often work for a variety of Contractors on multiple sites, which generally means that each year they need help with their self assessment returns.

Here are some suggestions to help:

1. If you are paid net of deduction makesure you have a complete set of Payment Deduction Statements http://www.hmrc.gov.uk/forms/cis-payment-deduction-statement.pdf these statements show how much tax has been deducted and you will be able to use these statements to reclaim that tax on your self assessment return, often the CIS deductions will mean that too much tax has been paid

2. Travel – Self employed workers claim all of their travel and motoring costs and exclude a % for private use

3. Clothing & PPE – gather together all the receipts you have for specialist clothing and PPE

4. Vehicles, Tools, Plant and Equipment – these items of expenditure may be eligible for Capital Allowances and the Annual Investment Allowance (£25,000 for 2012/13) if you have any private use then this will need to be assessed and excluded

5. Other Expenses – You will need details of Insurance, Accountancy, Materials, Bank Charges, Phones, Stationery, and anything else you spent money on

It might seem boring but collecting the information noted above could save you thousands.

steve@bicknells.net