Construction Industry Scheme

[BruceB]

Are those of you who are small companies doing solar pv registered under the HMRC Construction Industry Scheme (if you care to admit it in a public forum). The reason I ask is that I thought I would be able to avoid it as I do not subcontract to other companies, but I spotted something on accountingweb that suggests if I have a company erect scaffolding for me (booked for next week) then that is within the scheme.

Regards
Bruce

 

[Markc]

We, as a company, have been CIS for as long as its been about and the older schemes before that!

We do some works as sub contracted trades, Not PV mind but electrical contracting, Builders, conservatories etc.

Under the scheme if you involve sub contracted labour or services (Scaffolder in your case) I would say you will be responsible for deducting CIS Tax from the labour element of their bill and at a rate the TAX office requires.

This is down to you being the main contractor for the job......now saying that if the customer were to pay the scaffolders bill directly, The scaffolder invoices the customer direct, then there is no sub contracted works involved. No CIS deductions and No paperwork. So all this works until you want to make a little (if possible) on the scafffolders price.

 

[BruceB]

Thanks for the reply. I am effectively just one man now, having spent 36 years in the public sector in a 100,000+ organisation. I just want to keep paperwork to the minimum - as an example I do VAT returns every 3 months rather than monthly at the moment. Since I put my original post up I have had a chance to read the CIS manual and Finance Act 2004 and as ever it is wonderfully vague. The best I can get to is that if you install a power supply in a building then it clearly falls within the definition of 'construction operations'. However by their omission, it is possible to infer that the repair or alteration of a power supply system is not within the scope of 'construction operations'. You could then argue that adding some pv plant to an electrical installation is alteration of an existing installation so outside the scope of CIS. Its all a bit tenuous though.

Solar PV has been around long enough that I was surprised I could not find a clear answer.

Regards
Bruce

 

[Deleted member 26818]

You as an individual can register with the CIS.
This will enable you to work as a subcontractor and have your tax deducted at source at 20%.
If you don't register, and work as a subcontractor, you will have your tax deducted at 30%.
Registering as an employer with CIS, would entail first registering for PAYE, then using the information supplied from that department, to register for CIS.
Once registered for CIS, you will be able to employ subcontractors, and deduct their tax from what you pay them.
You will then have to submit monthly returns for CIS, and pay any tax/PAYE deducted to HMRC every 3 months, or inform them that you haven't deducted any tax/PAYE.
You will have to submit the return to CIS every month, irrespective of whether you have employed someone or not. You will be subject to a fine if you not submit the return on time (currently £100), and another fine every subsequent calander month the return is not submitted.
You will then have to make an annual return for PAYE, along with your self assesment.
It is unlikely that you would want to emply the Scaffolding company as Subcontractors, as you would likely have to employ them for the duration of the time the Scaffolding is in place.

 

[SRE]

You could of course spend a few quid on employing a bookeeper who would know all of this and spend your time generating work instead of stressing over whether you're legal or not. That's what I did and I've slept better in the last 2 weeks than I have in ages - it's difficult to let go of the crossing t's, dotting i's mentality of the public sector - I should know!!! But to move on as a one man band you'll need to do that - it doesn't mean you do a shoddy job just that you have to be a bit more realistic about how much work you can actually do working on your own.

 

[BruceB]

I think that makes sense. Spend your time on what you are good at, enjoy, and makes money. I am finishing off a big renovation myself at the moment and only just getting the business going so whilst I can see the sense of what you say I want to minimise outgoings until the business is established.

Regards
Bruce

 

[MorganPVI]

Bruce, bite bullet pay an accountant.

 

[SRE]

I think that makes sense. Spend your time on what you are good at, enjoy, and makes money. I am finishing off a big renovation myself at the moment and only just getting the business going so whilst I can see the sense of what you say I want to minimise outgoings until the business is established.

Regards
Bruce

I thought the same (had massive cash flow issues for the first 6 months - did my own - I'm well qualified (in other areas) and have just had to pay someone to rebuild my accounts system and sort my mess out. Would have cost half the price if they had done it in the first place. Happily waiting for my first vat repayment much quicker than I could have done it. A decent bookeeper will cost £12-£15/hour and do it in a fraction of the time you can. How many sales could you generate in the same time and what would the profit on those be??

 

[BruceB]

Well, a bit of thread drift, but thank you for those that say I need an accountant and I accept I may want to go that route as my emphasis in life switches. However I do have a CIMA Certificate in Business Accounting so I am failrly comfortable doing basic book-keeping and have been running PAYE, VAT and Corp Tax for a small family company for 10 years, albeit just a few jobs a year for my wife and me outside our day jobs. With an engineering background I am certainly as capable of reading and interpreting regulations as most. I read accountingweb regularly and without wanting to annoy any accountants who read this, I do get concerned that sometimes some of them forget who the client is and sometimes think they work for HMRC or want a quiet life and take the low risk approach for them and/or their clients. HMRC can overstep the mark and go beyond what the legislation says, or make genuine mistakes, so need to be challenged every now and then. My original question was whether I could avoid the hassle of CIS registration. I broke my own rule this morning (do not ask the question if you might not like the answer) and phoned the CIS helpline. In summary, their answer was that retro-fitting solar panels to a building was an alteration to an existing power supply system and that like repair and maintenance to power supply systems is outside-the-scope of CIS. She had to consult the 'technical specialists' as she said only had access to the same material I could find with google. CISR14090 was the key. She did say I could write to get written confirmation. So I am doing that and will report back in due course.

Regards
Bruce

 

[SRE]

Sorry Bruce wasn't doubting your ability, just the time taken. Interesting answer - our accountant and my accountant friend both insisted that we came under CIS. I'll send them your response. The problem is it's relatively new and most accountants haven't come up against it before so I suspect that your answer is more up to date ...

 

[BruceB]

Its ok no offence taken. I did wonder whether to put my last reply. I would prefer to get an answer in writing from HMRC before everyone starts asking and HMRC decide to give a different answer!

 

[SRE]

Just to add a spanner to the works my accountant, at my request has just checked the CIS helpline and they have insisted that everything related to pv does come under CIS and must be registered .....

 

[BruceB]

Perhaps it depends on how you ask the question and lead them through the logic. I look forward to their reply to my letter. It seems clear to me from CISR14090 that alterations to a power supply system are out of scope, but if in asking the question you major on alterations to roof structure then you are likely to get a different answer.

 

[SRE]

That makes sense - let us know what they put in writing ....

 

[RJ01]

I have just contacted CIS helpline this morning and been told it does fall under CIS as there is alterations to the building by adding solar panels, she told me the legislation has been updated in the last 2 weeks with regards to this, must be all the telephone calls they are receiving.

 

[BruceB]

I doubt the legislation has been updated, probably just their interpretation of it, which of course is not the law. Did they give you a document reference?

I am still waiting for a reply to the letter I sent to HMRC a few weeks ago.

Regards
Bruce

 

[RJ01]

No she didn't give any reference to it, I think I might delve further in yet and write a letter, let us know when you get a reply i'm very interested in there response.

 

[BruceB]

Got the reply this morning from HMRC. Here is the question as asked



and here is the answer



I am not inclined to fight them on it, so I guess that means that I must register.

Regards
Bruce

 

[RJ01]

Thanks for sharing that.

 

[Worcester]

@BruceB

I've just used HM Revenue & Customs: Are you a contractor or subcontractor under CIS? to find out how this would affect us as my accountant said that the way that we engage people meant it didn't apply, and having run a couple of scenarious through the above ESI tool, they came out as 'employees' not 'subcontractors' - this ties up with our employee insurance liability also, efectively confirming that we are not subcontracting any work ..

I'll get back to him (our accountant) and double check with him, however the way WE work (and it could be different for you) the implication is that until we become a 'deemed contractor' we could well be exempt - depending upon whether it is the total works value or just what we pay our 'employees' (as defined here)

When are you a contractor under CIS? Under the rules of CIS, you're a contractor if:

• you run a business that engages subcontractors for construction operations - a 'mainstream' contractor
• you run a business that spends an average of £1 million or more a year over a three year period on construction operations - a 'deemed' contractor

 

[BruceB]

I engage a scaffolding company to put up and take down scaffolding. As I read it, because they use their labour, they are subcontractors and I am a main contractor.

 

[Worcester]

Probably in that case. We work differently, however I've been in construction for 30 years!

 

[Deleted member 26818]

I engage a scaffolding company to put up and take down scaffolding. As I read it, because they use their labour, they are subcontractors and I am a main contractor.

Would not the same apply to skip hire?

 

[BruceB]

Would not the same apply to skip hire?

Different I judge, because there is no labour element involved.
CISR14260 - The Scheme: construction operations: plant hire
But I am clearly no expert

 

[Deleted member 26818]

Perhaps not a good example.
My point is that if you hire an item, such as scaffolding, a skip, a JCB etc. You are only hiring that item, not the labour involved in delivering or maintaining the item.
If you were, as happens on larger construction projects, to contract the scaffolders to be on site for alterations during the term of the construction period, then yes you would be subcontracting the labour.

 

[albsmith]

The Construction Industry Scheme, which is frequently abbreviated to CIS is a scheme implemented by the government to prevent tradesmen such as carpenters and plumbers employed by contractors to exploit loopholes in the law and ultimately end up avoid tax. In some situations tradesmen have been paid cash in hand by contractors allowing them to avoid tax payments, the construction industry scheme was implemented to prevent this.
Contractors that have an expenditure over a certain level are required to comply to the construction industry scheme, which dictates that must ascertain the tax status of all their employees. The construction industry scheme is not a particularly popular initiative with people involved in contractual work as it causes a great deal of additional paperwork for them. Contractors who are affected by the Construction Industry Scheme are required by the Inland Revenue office to submit a monthly report detailing any tax payments they have made for their workers and any deductions that have been made.
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