You are probably aware the Current Construction Industry Scheme (CIS) will be replaced by a new system from April 6th 2007. There will no longer be any CIS registration cards, certificates or vouchers.
Instead contractors will now have to “verify” new sub-contractors directly with HM Revenue and Customs (HMRC). In addition, each main contractor must decide whether anyone being hired is either self-employed or an employee and must sign a declaration to that effect.
If in doubt as to the status of any new worker HMRC have an Employment Status Indicator (ESI) tool which although not obligatory, may be a useful device for the main contractors. This can be found at www.hmrc.gov.uk/calcs/esi.htm
Q: Will there still be 18% deductions taken from self employed workers?
A: Under the new system the deductions are 20% and 30%. After engaging a new worker on a self employed basis you must contact HMRC to confirm that the sub-contractor is registered for CIS. HMRC are operating a helpline from 8:00am to 8:00pm every day, (telephone 0845 3667899). If the sub-contractor is registered then HMRC will advise whether to pay him gross or whether to deduct 20%. If the sub-contractor is not registered or they cannot trace his registration then he will not be “verified” and deductions will be made at 30% until told otherwise by HMRC.
Q. I complete an annual return (CIS36) detailing all my sub-contractor payments and deductions. Will this continue under the new system?
A: The CIS36 is being abolished and replaced by a new monthly return (CIS300). It must be submitted by the 19th of each month or a minimum penalty of £100 wil be applied. Other penalties of up to £3,000 can be charged for various failures and omissions. The penalties apply even if there is a nil return.
Q: What is replacing the CIS25 vouchers?
A: HMRC will no longer issue vouchers nor will there be anything to replace them. Employers will be obliged to issue monthly payment and deduction statements to sub-contractors. Although no standard format is required an example layout of a payment and deduction statement can be found on the HMRC website.
HMRC are currently giving presentations locally to contractors and their agents about the new system. For further help there is a guide available called CIS340 from the website whcih can be found at hmrc.gov.uk/new-cis or you can call their helpline on 0845 366 7899.
As mentioned before balance transfers can be a useful tool in addressing your debt problems but they are only a short term measure. If you have debt worries, you may benefit from speaking to a professional on a free and confidential basis.
McCambridge Duffy specialise in helping self employed individuals. Should your business be experiencing any financial difficulties call free on 0800 043 3328 where one of our highly experienced staff will be available to help you.