Please find below a reminder to all contractors regarding CIS tax.
As a contractor it is your responsibility to ensure that the correct amount of CIS tax is deducted from your subcontractor’s invoices and reported to HMRC. Failure to do so could result in HMRC issuing a determination under regulation 13. This is to cover deductions they have reason to believe should have been made.
In order to ensure that the correct CIS tax is deducted, all subcontractors must be verified with HMRC. This must be done prior to payment being made. This will then confirm a CIS tax status of gross payment (0%), net payment (20%), or unknown to HMRC (30%).
If a subcontractor is unknown to HMRC it may be that the information entered on the verification contains an error. Or the subcontractor hasn’t registered with HMRC as working within the Construction Industry Scheme. The higher rate of 30% CIS tax would need to be deducted until this issue is resolved and re-verification has occurred.
Each time a subcontractor is included on a CIS return a statement of payment and deduction (or CIS voucher) will be prepared. It is a legal requirement that these are provided to the subcontractors by the 19th of each month.
Penalties and interest may apply for failure to meet your obligations as a Contractor. We have included a link to the HMRC guidance for your attention. If you need any further assistance please contact Bright Brown at info@brightbrown.com.
