If you’re not an employee of an employer but work for a contracting party, such as a builder, then you may be considered for self-employment status and designated for UK Self Assessment Tax. For most professionals, this is probably going to be a very straightforward and easy process, but for many contractors and other employees, it can be far from straightforward and simple. The self-assessment regime of the UK CIS tax consists of two main parts, and they are equally important, however, they can seem fairly complicated. There are several ways to qualify and meet the eligibility criteria for the scheme, and there’re many more rules and regulations than there are people.
Certified Budgetary Assurance
The first part of the scheme is what is called the CIs tax or certified budgetary assurance, scheme. The CIS consists of two parts and these are the Certified Costing Unit and the Certified Provisional Income. The CIs consist of several items including, but not limited to, the master contract, the master lease, the master service agreement and the indemnity agreement. The total amount of all of the CIs that are entered into must amount to at least one hundred and twenty-five. However, the amount may be higher in certain circumstances.
CIS Tax Involves the Sub-Contractors
Another part of the CIS involves the sub-contractors. This is where the two different parts come together. If you’re a licensed contractor and you’re putting a new building up, you can incorporate the cost of the new structure into your personal budget and enter it as a sub-contractor to another contractor. Alternatively, if the person who is putting the structure up is not a licensed contractor but has all of the necessary permits, you can make a new contractor out of the subcontractor and incorporate their costs into your personal budget. The result is that a CIS tax program will pay both the contractor and subcontractor for their services, which is why there are often separate CIs and the need for individual subcontractors.
Deduct the Cost of the VAT from the Principal Payment
A few things to keep in mind about using this system of making payments is that the cost of the total project is added to the principal payment each month until the project is paid in full. When this happens, the CIS tax system will then deduct the cost of the vat from the principal payment, but the actual payment amounts won’t change. The second aspect of CIS payment is that any applicable VAT reverse charge deductibles are applied to the principal payment on a monthly basis. These deductions are only applied to the first thirty days of payment after the project is paid in full, and they apply up to thirty days from the date that the invoice was received.
Contractors and Subcontractors Register with the CIS
It is very important that contractors and subcontractors register with the CIS. In addition to being required to provide accurate details of the work they are doing, they must also indicate their intention for paying the amount owed by registering for the program. Contractors must register for all materials and supplies that are going to be used in the construction of the project. For any materials and supplies that are listed in a contract, it is essential that they are used. If a subcontractor does not indicate how materials and supplies are to be used, it is essential that they complete this task and get a determination as to how they should be charged for the work. The best way to avoid charges on such items is to ensure that they are used and recorded in the contract.
Different Aspects to CIS Tax
There are many different aspects to consider when it comes to using CIS. The different ways to make payments to contractors and subcontractors are important considerations, but the manner in which contractors and subcontractors are charged for their services is what makes CIS extremely attractive for accountants. All trades accounts and material and supplies must be registered with the CIS before they are paid, and the monthly returns must remain updated in order to avoid charges on the material and supplies.
Subcontractors Working on any Construction
As a general rule, any subcontractors working on any construction work must register for the system before they can be paid. This is an important aspect of working with the system that many accountants overlook. If you fail to register all of your tradesmen and advisor, you will be charged fees for not having them on your payroll, regardless of the actual cost of their services at the time of payment.
Conclusion
If you want to avoid charges on material and supplies and if you want to keep invoices up to date, it is essential that all tradesmen and subcontractors have a CIS account maintained with the company. This way, you will be able to determine the exact cost of the materials and supplies being used and can avoid incurring charges on material and supplies when you do not need to. Many businesses take advantage of the benefits of the CIS, and many accountants are finding this to be an ideal way to manage their businesses.
