an introduction to new cis jan hart standard (transition) may 2007 revenue advice team

An Introduction to New CIS

Jan Hart

Standard (Transition) May 2007

Revenue Advice Team


Out with the old…in with the new

Old CIS

• Out with…..

– cards or certificates

– vouchers

– Annual Return (CIS36)

New CIS

• In with…..

– verification

– monthly returns

– payment and deduction statement


Setting the scene

You are a contractor for a small building firm, trading by the name of Perkington Building Contractors.

You have on your books four subcontractors who have worked for you within the last year. Two of them are paid gross and the other two are paid net.


List of Subcontractors received from HMRC (Nov 06 & Mar 07)

Q Why?

A There is no need to verify the subcontractors on the March/April list. The November list gave you an early indication of the subcontractors who will not need verifying.


Closing down old CIS

• Send in all vouchers to HMRC for any subcontractors paid up to and including 5 April 2007.

• Remember an end of year return is still due under old CIS, and you need to send your CIS36 to HMRC by 19 May 2007.

• Remember to include your CIS figures on your P35 and send to HMRC again by 19 May 2007.


Start of New CIS 6 April 2007

• Verification

• Monthly returns

• Statement of deduction

• Paying subcontractors

• Penalties

• Online services


Engaging a New Worker

Perkington Building Contractors have just won a tender and need to engage a new worker (Douglas Black), a sole trader who hasn’t worked for you before.

Q What do you need to do now?


Check employment status

Q How do we do that?

A – Phone CIS Helpline on 0845 366 7899

– See Fact Sheet CIS349

– Use the ESI tool at www.hmrc.gov.uk/calcs/esi.htm


Employment Status Indicator (ESI)

• The ESI tool will advise you whether someone is employed or self-employed in all but the most complex cases.

• You are not obliged to use ESI but you might find it useful, as you are responsible for ensuring the correct employment status of your workers.

• You can get a view of your workers’ status by using our website.

Standard (Transition) May 20077875A-PP 10 December 2006


Verify subcontractor – why?

To check that the subcontractor is registered for CIS and find out whether you should pay them gross or under deduction.


Verify subcontractor – what details do you need?

• his name

• his Unique Taxpayer Reference (UTR)

• his National Insurance Number (NINO) if known

plus

• your name, your UTR, your Accounts Office Reference and your Employer Reference.

Douglas is a sole trader – you need


Verify subcontractor – how do you do that?

• Telephone the CIS Helpline on 0845 366 7899, open 08.00–20.00 seven days a week.

• Internet at www.hmrc.gov.uk/new-cis

• Use third party software.

• Electronic Data Interchange (EDI).


Verify subcontractor – what happens next?

• his name

• his Unique Taxpayer Reference (UTR)

• his National Insurance Number (NINO)

plus your own details and you decide to phone the CIS Helpline.

You have the following information about Douglas


Verify subcontractor – what does the CIS Helpline do?

• Check that the subcontractor is registered for CIS.

• Tells you what rate of deduction to apply.

• Gives you verification number eg V0005432678.


Another new worker

Due to bad weather work has fallen behind and you need to take on another worker urgently. Douglas recommends Phillip White to you but the only information Phillip gives you is his name and that he’s a sole trader.


Confirmation of what you need to do

• Check employment status

• If self employed get subcontractor details

• Get your details

• Verify subcontractor

• Get rate of deduction


Phone Helpline – There’s a problem

Because Phillip has not given you his Unique Taxpayer Reference (UTR) or National Insurance Number HMRC are unable to trace a record for him.


Decision….

You are told to make deductions at the higher rate.

HMRC provide you with an unmatched verification number that looks like this

V0000543267/A

You MUST keep a record of this and include it on your monthly return and Phillip’s statement of deduction.


Changes to payment status

When a subcontractor’s payment status changes

• HMRC notifies the subcontractor of any changes.

• HMRC also notifies all contractors who verified or paid the subcontractor in the current or previous two tax years

• You apply the new rate as instructed in the notification

• HMRC gives subcontractors 90 days notice and contractors 30 days notice of a change in the subcontractor’s tax payment status


Do you need to verify every subcontractor?

• they are on the list sent to you in March/April 07

or

• you have already included them on any monthly return in that tax year,

or

• you have paid them since 6 April 2005 and when you last paid them you had seen a registration card or tax certificate which was valid until at least April 2007.

If you are paying a subcontractor in the first tax year of new CIS you do not have to verify them if


Paying Subcontractors

For subcontractors who have deductions made at standard rate or higher rate you must provide a statement of deduction.


Monthly return

It’s now 5 May 2007 and you receive your first monthly return pre-populated with details of your current and previous subcontractors.

What do you do now?.....


Decide how to make a monthly return

You have a number of options

• on paper by post

• use HMRC’s free online service at www.hmrc.gov.uk/new-cis

• use third party software or EDI


What do you include on the monthly return?

• Details of all payments made to all subcontractors.

• Verification number if higher rate applied.

• Confirmation of employment status of all subcontractors.

• Confirmation that verification process has been applied.

• Your signature (if paper return).


Completing your first monthly return

Name Payments Cost of Amount deductedmade materials on account of tax

Ahmed Khan 1,000.00 155.00 0.00

Adam Davies 800.00 0.00 160.00

Douglas Black 600.00 0.00 120.00 UTR 5678901234

Phillip White 200.00 0.00 60.00Verification Number V0000543267/A


Completed monthly return

1 0 0 0

8 0 0

0

1 6 0 0 0



56789 01234

6 0 0

0

1 2 0 0 0

DOU G

B L ACK

LA S



2 0 0

0

6 0 0 0

0000543267 A

PH I L WH I T EI P


What do you do with the return?

You must send your monthly return to reach HMRC by the 19th of every month.

For example, a return of all payments made to subcontractors between 6 April and 5 May must reach HMRC by 19 May.


What do you do if you’ve not paid any subcontractors?

– use HMRC’s free online service at www.hmrc.gov.uk/new-cis

– phone the CIS Helpline on 0845 366 7899

– use third party software or EDI

– use the paper return.

You must submit a nil return.

There are four ways to do this


Online Services

• Quality and accuracy

• Speed

• Safe and secure

• Convenient

• Savings

To register visit www.hmrc.gov.uk

Online demonstration available following this presentation.


Paying HMRC

All deductions made from subcontractors and included on the monthly return must reach HMRC by the 19th of the month or 22nd of the month if payment is sent electronically.

For example, deductions made between 6 April and 5 May must reach HMRC by 19 May or 22 May if payment sent electronically.


Penalties

• If you fail to submit a monthly return on time we will charge you a minimum penalty of £100.

• You may be charged penalties if your return is incomplete or incorrect.

• Plus, your gross status as a subcontractor may be at risk.


Tax Treatment Qualification Test (TTQT)

• TTQT is applied when gross payment treatment is requested either at registration or on subsequent application

• There will be an automated test of a Subcontractor’s compliance over past twelve months.

• Failure to pass TTQT will result in non-allocation/removal of gross status.

• Test includes check on CIS, Employer and Self Assessment/Company obligations.


Appeals

You have the right of appeal against any penalty or decision against gross payment made by HMRC. The appeal should be in writing to your HMRC office.

If the appeal cannot be resolved by your HMRC office it will be heard by the Appeal Commissioners who are independent of HMRC.


Amending a Monthly return

• phone HMRC on the CIS Helpline number (0845 366 7899) with full details

• keep a record of the amendment(s) made

• keep a record of the date call made.

If you make an error on your monthly return that has been sent to HMRC you should


End of Year – April 08

• If you are not an employer No end of year action needed.

• If you are an employer Add up all 12 monthly returns (remembering to include any amendments made) and enter total figure onto P35.


Timeline

Nov 06 1st Subcontractor list

Mar/April 07 2nd Subcontractor list

Mar/May 07 Close down old CIS

April 07 Start new CIS on 6th

April 07 onwards Register for CIS online

May 07 1st monthly return under New CIS and last CIS 36 for old CIS to reach HMRC by 19 May


Further Help

• Checklist

• Online at www.hmrc.gov.uk/new-cis

• CIS Helpline number: 0845 366 7899

• Business Support Teams

• HMRC publications


Any Questions

THANK YOU

an introduction to new cis jan hart standard (transition) may 2007 revenue advice team

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