Hi all. I've been self employed now for three years, trading as a sole trader and taking care of my own tax afairs. Most of my work is private, but also some light commercial or industrial. Up until now I have never had problems with payments. However, recently I did a small job for a company of shop fitters. No problems with payment. But I have just had an email from then asking for details of my CIS card. If I don't provide them details they will deduct 30% tax from any future invoices. So excuse my ignorance for something I feel I should know is what is a CIS card? should I have one? and if so where do I get one and what does it cost, do I have to prove my qualifications to get it etc etc. Also if they DO deduct tax, why 30%? I don't earn enough to push me into the higher rate tax band, so I would be happy if they deducted just the normal 22% tax, then it would go into my accounts as tax paid, but why 30%?
The above link will tell you everything. A potted summary is as follows - It's the Construction Industry Scheme (CIS) for Contractors. The Government was becoming miffed with the quantities of 'cash' being paid to subcontractors that evaded VAT and tax. So, if you are a large contractor, and paying out in excess of something like 100,000 (I may be out of date) to subcontractors, you have to withhold tax at source. It's a bit like PAYE if you're employed. It just IS 30%. You reclaim it on your tax return. To avoid having the tax withheld, you have to enter the Construction Industry Scheme. Once you're a member of that you get a membership card and a number. Broadly speaking, instead of withhlding the 30%, they make a note that £30,000 has been paid to Joe Bloggs, and tell the tax man. The tax man checks that Joe Bloggs has declared his £30,000 so everybody is happy. No really.
Contact your local tax office, you will need to make an appointment to see them regarding the registration. Take 2 forms of ID with you with your address on them..utility bill etc. Also you will need to take one passport size photo with you. You'll need your national insurance number too. The whole process only takes 10 minutes and you will receive your card within 7-10 days. It will cost you nothing. I only know all this 'cos I received mine last week!
I work for a contractor who deducts 18% of my labour content but nothing off the material content.what I find unfair in the CIS scheme is the fact that 18% is nocked off my travelling & accomodation costs which I p[ay up front.To avoid having 18% deducted you have to have a profit of 30K every year.
I might have guessed if the Inland Revenue has anything to do with it, they will try and complicate the scheme as much as possible. A 64 page explanatory booklet for gods sake, haven't had chance to read much of it. What I did notice is there are at least three different types of card, so how would I know which one is right for me? Is this a scheme I could join, and only use every once in a while? i.e whenever this shopfitting firm give me a job, or will it expire if not regularly used. It seems to me this scheme is for the CONSTRUCTION industry. Why therefore are a company of shop fitters applying it? I would no more expect a shop fitting company to apply this than say the owner of a pub when I go and change some light fittings. I give hime an invoice, he pays it in full, I enter it into my accounts and the tax due is worked out at the end of the year. Simple. My inclination is not to bother, and as you say, if they DO deduct tax, then that tax paid is just entered onto my tax return.
It applies (broadly) to all firms that spend over £1m on construction work each year; year on year. So property investment companies refurbing a lot of flats. Tescos. M&S. Presumably your kitchen fitters do over £1m of business. It does not apply to private individuals.
CIS applies to every single person operating in the construction industry. This includes electricians, roofers, builders, plasterers - you get the idea. It applies to all work outside of domestic, and where there is a contractor above you - ie if you're an electrician dealing directly with a client it does not apply, but if you're subbing to a builder/other contractor, then it does apply. The person you are contracted to will deduct 18% from your labour and travel costs, but not from materials; this is if you have used your own materials, and if you supply a breakdown of costs on your invoice. Working for local authority also requires registration with CIS as they will ask to see it. CIS is in no way being phased out, they are just making it a little better controlled - hoping to remove dodgy contractors and foreign workers. CIS is a separate issue from VAT and LTD company status, and if you have either of the latter two, it does not make you exempt from CIS registration. To get around the need to have 18% deducted at source, you must earn a minimum of £30k per annum as labour only, and you will need invoices to prove this - this is known as CIS6 registration. To register you simply go to your local tax office with two recent passport photographs.
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