What is CIS?
The Construction Industry Scheme (CIS) is a special tax deduction scheme. A scheme that deducts tax at source from certain payments relating to construction work. It is designed to counter the black economy, that is perceived to exist in the construction industry. Particularly its poor record of tax compliance.
The burden of CIS is mainly on those making the payments. CIS is similar to the PAYE system in that, where tax is to be deducted. However it is deducted at source by the person making the payments. This ensuring that the tax is collected. However, unlike PAYE, tax is deducted under CIS at one of two rates. This is depending on the status of the recipient.
Details CIS Control
What is Gross Payment Status?
Possible Revocations of CIS Status
HMRC annually reviews a sub-contractor’s compliance with the CIS gross payment criteria. This is known by HMRC as a “scheduled review” or an “onging Tax Treatment Qualification Test or TTQT”. HMRC also reviews 2% of gross payment status holders each week.
HMRC will not inform sub-contractors of the review date. If a sub-contractor has never had its gross payment status threatened or removed by HMRC, it can assume that it has always passed its TTQT reviews.
Loss of Gross Payment Status
What to do if a CIS 308 letter is received
If you receive a CIS 308, first review the reasons given by HMRC for revocation of gross payment status:
Do you believe the facts are correct?
For example, are the dates shown for the receipt of returns, and payments matching the posting and payment transmission dates on your records?
For each failure, is there a reasonable excuse(s) that lasted until the return was posted? Or the payment was transmitted?
It is also important to note that once a sub-contractor lodges an appeal, its gross payment status is reinstated until that appeal is decided.
Deciding whether to appeal against Revocation of Gross Payment Status
Upcoming changes to CIS – consultation on security deposit obligation
In the Autumn 2017 Budget, the government announced that there would be a consultation in spring 2018. This would be on measures to extend existing security deposit legislation to include corporation tax and the CIS. (At present, HMRC may require a company to make a security deposit, if it has a history of failing to meet its VAT or PAYE obligations.)
Any extension that is introduced as a result of the consultation will be included in the Finance Bill 2019. This will take effect from 6 April 2019.
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