Working as a CIS Subcontractor
The Construction Industry Scheme (CIS), a scheme overseen by HMRC, creates and governs the rules for how subcontractors performing construction work should be paid by their contractors.
Though the scheme was developed with mainstream contractors and subcontractors in mind, it’s since been adopted by large companies and organisations spending a significant annual sum on construction costs that can, therefore, also be deemed to be contractors.
If you’re working as a subcontractor in the construction industry, and you believe there’s a chance you may be deemed as such under CIS, HMRC have produced a simple guide to instantly determine your status.
If you do fall under CIS, speak with your accountant to determine whether you should…
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New Tax Treatment of Workers Supplied via UK Agencies
Earlier this year HMRC published detailed guidance on the (then) upcoming changes in the tax treatment of workers supplied through UK agencies, employment businesses, or other intermediaries.
These new rules, which came into effect on 6 April 2014, were brought about due to changes made in Finance Bill 2014, and they only affect workers who have in the past been provided to their end clients via a third party on a self-employed basis.
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Settlement Opportunity for Contractor Loans
HMRC is currently offering a settlement opportunity, available until 9 January 2015, for the users of contractor loan tax schemes for tax years up to 5 April 2011.
Commonly known as a tax-avoidance arrangement, a contractor loan scheme is a tax scheme whereby, according to HMRC, “…non-UK employers have paid you untaxed income or given you a loan instead of part of your salary.” Users who agreed to be paid in this way argue that being paid via a loan means they’re not subject to income tax, however, HMRC views these loan schemes as a “particularly aggressive” method of tax avoidance.
Speaking on the issue of tax avoidance, and the settlement opportunity currently being offered, Jennie Granger, Director General for Enforcement and Compliance at HMRC said, “Many people regret ever getting involved with complex aggressive tax avoidance schemes and HMRC is providing an opportunity for contractors to come forward and straighten out their tax affairs.”
Your Eligibility
Designed to allow you to “bring your tax affairs up to date on the best possible terms,” anybody who has used a contractor loan scheme can take up this settlement opportunity from HMRC unless you’re currently:
- Subject to HM Revenue & Customs' (HMRC's) criminal investigation policy,
- Subject to civil investigation of fraud procedures,
- A UK employer who has used an Employee Benefit Trust and should being using the employee benefit trusts settlement opportunity.
More details can be found on the settlement opportunities page on HMRC’s website surrounding individuals who can and can’t take advantage of this settlement opportunity. Needless to say, if you’re unsure whether you’re eligible to use this opportunity, speak with your accountant before contacting HMRC directly.
Know What You Owe
Whether you (or your accountant) contact HMRC to take part in this settlement opportunity, or you get a letter from HMRC to let you know they believe you owe them unpaid income tax due to your use of a contractor loan tax scheme, HMRC may estimate the income tax you owe based on typical rates.
For this reason you should make a point to check your personal bank statements and records to let HMRC know of the exact amounts you received via your contractor loan tax scheme. To know how much you owe prior to agreeing to settle, complete form DO3 to request a calculation.
Agreeing to Settle
If you agree to settle, the terms of any signed agreement will become legally binding between both you and HMRC, and will not be affected by any further legal proceedings going forward.
Your settlement will include late payment interest for income tax payments HMRC believe you should have paid, but by coming forward as part of this opportunity you will not be liable to any penalties (however, if any of your loans came from a trust you may have to pay Inheritance Tax on the amount due).
Interest will add up from your original income tax due dates until the moment you pay.
Refusing to Settle
If you choose not to take advantage of this settlement opportunity HMRC will continue in their efforts to ensure that anybody who has previously used a contractor loan tax scheme to avoid paying income tax eventually pays back what they owe, with interest and National Insurance Contributions (NICs), alongside significant monetary penalties.
Interested in a Settlement Opportunity for Contractor Loans?
To speak with a professional to discuss the settlement opportunity for contractor loans, or anything else, contact us today on 020 7129 1199 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.
Contractors Now Receiving Accelerated Payment Notices (APNs)
Back in July 2014 HMRC published a list of over 1,000 schemes that they deemed to be tax avoidance vehicles, claiming that they will soon start sending out Accelerated Payment Notices (APNs) to taxpayers, including contractors and freelancers, who have invested in these schemes.
Under the new rules associated with APNs it’s mandatory for contractors who receive one of these letters to pay any tax bills upfront before appealing their case; including the full payment of all and any bills you dispute. If you don’t pay your tax bill in full you will automatically incur fees and penalties, even if you intend to appeal the decision.
Though these new rules were due to come into effect in July, HMRC have since revealed that APNs will start being sent out from August. It’s worth noting that if you are due to receive an APN you will first be sent a notice letting you know that HMRC have placed your tax payments under consideration. You should use this time to gather your payment options, as once you receive your APN you’ll have exactly ninety days to pay your bill in full.
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Change Your Accountant in 3 Easy Steps
Don’t you hate feeling you’re locked into working with a company that no longer suits your needs, or simply isn’t performing to the high standards you (rightly) demand of them?
Here at Tax Agility, we believe our quality of services and the professionalism and experience of our accountants should speak for themselves. For this reason, we don’t charge our clients transfer or termination fees should they wish to stop working with us. We’re sorry to see you go, but we respect your decision with grace; and without putting you out of pocket.
If you’re a self-employed contractor, or a small to medium-sized (SME) business owner, and you’re considering changing your accountant (whether to Tax Agility or any other experienced accountancy firm) below we’ve detailed three easy steps to doing exactly that:
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4 Ways for Contractors to Negotiate Better Rates
We all want to be paid more for what we do, with contractors and freelancers, such as yourself, being in a better position than any of us to negotiate your way to the top.
Whether you’re a freelance photographer, electrical contractor, or the owner of a small service business, the below negotiation tactics should put you in a position to negotiate better rates in no time. Keep in mind, the higher rate you choose must be justified. It’s only fair that you’re paid a reasonable figure for each job (see point one), but it’s equally fair that your clients aren’t overpaying for the service you’re providing.
Our negotiation tactics for contractors and small service business owners are as follows:
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