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CIS History

HMRC have long since felt the construction industry has been paying for less tax and national insurance than it should be. Various methods of redressing this shortfall have been implemented since the 1970’s, the latest of which being the ’new’ CIS scheme, which was introduced in April 2007.

As with the old CIS scheme, in order to address the issue of ‘disguised’ workers, contractors have again been forced to review the employment status if their workers with specific reference to HMRC’s own guidelines.

Unsurprisingly, many contractors have now found out, according to HMRC, their self-employed tradesmen should in fact be employees.

The ‘new’ CIS system exposed three different task status levels, mandatory pre-authorisation by HMRC for any new self-employed engagement and much tighter reporting. Pre- authorisation requires specific approval by telephone, web access, or by electronic message. The tighter reporting now includes monthly statements and specific tradesmen earnings and must be accompanied by details of ID verification and a declaration that status has been reviewed monthly

Since the new CIS was implemented in April 2007, HMRC have been increasingly aggressive in its policing of regulations.

More than 10,000 companies have had their gross payment status removed, often for very minor contravention of these new regulations.

Threats

Contractors who continue to engage self-employed tradesmen directly face constant uncertainty over the legitimacy of their actions and potentially massive claims for tax and National Insurance, as well as fines from HMRC. They also face the potential of attack from sub- contractors in the form of punitive statutory holiday pay claims.

Employee status

Since the introduction of the new CIS in April 2007, the revenue have trawled through the CIS records submitted by contractors looking for returns that indicate using the revenues own definitions, that sub-contractors may in fact be “disguised employees”.

Consequently, many contractors have received warning letters advertising them that the revenue has doubts about the status of their sub-contractors and that if they haven’t addressed the issue by the time their case is reviewed, they will be liable for heavy penalties and back tax.

To avoid your business being fined or prosecuted by HMRC get in touch on 0113 8267260 or use our online contact form:

 

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