Key Points of CIS: Registration: Contractors must register with HMRC for the CIS. Subcontractors can also register to avoid higher tax deductions. Verification: Contractors must verify subcontractors with HMRC before making payments to determine the correct deduction rate. Deductions: Contractors must deduct tax from subcontractors’ payments and pay it to HMRC. The deduction rates depend on the subcontractor’s registration status with HMRC. Monthly Returns: Contractors must submit monthly returns to HMRC detailing payments made and deductions withheld. HMRC Guidance and Compliance HMRC provides extensive guidance on off-payroll working, including in its Employment Status Manual (ESM) and various other online resources. Key aspects of HMRC guidance include: Check Employment Status for Tax (CEST) Tool: HMRC offers the CEST tool to help determine whether the off-payroll working rules apply. While not legally binding, using the tool and keeping a record of the outcome can help to demonstrate
The engager (or deemed employer/fee-payer) must operate PAYE, NI and (if appropriate) the Apprenticeship Levy where the SDS shows the worker is a deemed employee or “inside IR35”. Transfer of Liability: If the deemed-employer/fee-payer (when different to the end-client/ engager) fails to meet their obligations, HMRC can transfer the liability up the chain to other parties. The HMRC guidelines for compliance are particularly helpful, ‘Help to comply with the reformed off-payroll working rules (IR35) — GfC4 - GOV.UK’ Construction Industry Scheme (CIS) The CIS is a set of rules for contractors and subcontractors in the construction industry or those involved with construction contracts, who spend more than £3m on construction operations in a rolling 12-month period. It ensures that tax is deducted at source from payments made to subcontractors. However, in all cases, the off-payroll working rules above should be applied before CIS, and this is often missed.
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ISSUE 8 GLOBAL PAYROLL MAGAZINE
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