cis question

deborahcarpenter

Hello All,

I have a client who runs as a Limited Company (no employees ). He received CIS payments nett through out the year. He has drawn £23k from the business over the year. I need to submit a Self assessment return for him (as requested by HMRC) How do i account for the deduction already made under CIS. DO i show it against his business tax or self assessment? and do i gross up the money received? Also his previous accountant told him not to keep any invoices for work carried out or receipts so he would not have to pay VAT???? so my client has no paperwork to support his income or outgoings )However he did keep his bank statements) Surprise surprise the previous accountant has gone AWOL!!!
I know this is probably a really dumb question but i have never had to deal with this before.
Many thanks in advance.

deanshepherd

CIS is not my 'thing' but initial thoughts:

- If turnover of the company is below VAT threshold then VAT is not an issue anyway.
- Presumably the company is registered for CIS and the payments have been made net to the company. In which case they do not go on the individuals self assessment return at all. If of course it is the individual who is registered and to whom the payments were made then you have a problem.
- The £23k is either salary, loan or dividends so will go on the personal tax return (or not) according to what they were. Check the company accounts to see how they were treated.

There is a reason I do not get involved in the construction industry - clients like this!

JodieR

Agree with Dean here... just to add that the CIS deductions are usually used to reduce the corporation tax liability. As he's operating through a Ltd Co they could also be set against employer's tax/NI liabilities but it doesn't sound like that would be appropriate in your case.

Bluewednesday

Hi JodieR

Have you managed to offset CT with CIS? I've got a client that's got a huge refund outstanding and can't pay his corporation tax because of it and they have refused to offset even though they've agreed the refund!

I think this one is escalating to the complaints handler although I'm sure it won't make a blind bit of difference!

BIG WAL

Re Blue Wednesday's comment, HMRC's refusal to offset CIS refunds against CT is an ongoing problem.

If Agents are registered to use the Agent Account Manager Services, these cases can be pursued via the AAM issue
resolution route. For an agent who is not registered with AAM Services, go to:-

http://www.hmrc.gov.uk/agents/aam.htm#3

to register, and then follow the link set up the HMRC AAM service

Bluewednesday

I've registered for that as we are getting sooooo fed up that the refund is authorised after jumping through a variety of hoops and everyone can see it sitting there but no one is doing anything about getting it out to the client!

KaySarah

Reply to Deborah Carpenter

Excuse me for poking my nose in here - but as I work with a subcon base in excess of 300 - I thought you wouldn't mind my tuppence worth.

The CIS rules state that a Statement of payments made & tax deductions taken MUST be sent to each subcontractor by the 19th of each month following the month of payment to the subcontractor. These Statements are also "receipts" for the Tax that has been deducted and paid over to HMRC and are usually entered onto the EOY P35 to offset NI/PAYE (in the case of your client being an Employer) and/or to reduce Corp Tax if client doesn't pay anyone through PAYE.
Although these Statements/Receipts usually state, please retain as duplicates cannot be issued - I have frequently issued duplicates together with copies of SubContractor Payment Certificates (which are issued every time a payment is made to a subcontractor) [in line with the New Construction Act, although we have done this for years as it clearly shows which payment number it is you are making, Gross Accumulated for the job, retentions held, MCD and Tax Deductions and the rate of deduction - either 20% or 30%, your subbies' UTR Number as well as the Main Contractors UTR number, so all can be Audit trailed back should HMRC do a Compliance Check].

Ask your client who he has done work for and contact the Contractor, who I feel sure will treat your request for duplicates sympathetically.

I hope this is of use to you and apologies again for butting in.

clegganator

I'm a bit lost here. The client is a ltd company but you need to submit a self assessment return?

In answer to other question turnover would be net + CIS. Can't comment on any other questions because of above.

groundy

CIS is not offset against Corporation Tax, it is reclaimed in full as a refund on the P35 at 5 April. The corporation tax is then paid seperately. However, due to HMRC shutting all local offices and moving CIS to Newcastle chances are you won't have received the CIS refund by the time CT is due. We recently had a client threatened with legal action over a £10k CT bill when £20k due back in CIS. HMRC response was there a difference department.

We have now taken to filing P35 with CIS refunds as close to 5 April as possible and then immediatley after filing write to Newcastle office requesting refund. This has helped a little this year with some but still jumping through hoops to get the refund on most.

Bluewednesday

Have finally got them to agree to set off this morning, apparently the carbon didn't work and the authorisation signature didn't get duplicated so it was rejected - can you believe that!!

They've agreed to offset against CT and refund the difference to the client - marked urgent but will still take 2-3 weeks - I'll believe it when I see it!!!!

Gem7321

clegganator wrote: »

I'm a bit lost here. The client is a ltd company but you need to submit a self assessment return?

Probably one of those cases where HMRC have determined that the director needs to make a self assessment but actually doesn't need to do one at all. But he does because HMRC have issued the notification.


1. Obtain the CIS deduction statements and determine that the subcontractor is in fact the company and not the individual.
2. You mention that the company has no employees therefore the £23k must be dividends or directors loan (and consider a director's tax efficient salary for future years). You'll need to tie this up with the company accounts and declare accordingly on the self assessment if required. Are you preparing the company accounts and corporation tax return yourself?
3. I imagine the receipts and invoices you mention are relating to the company and not the individual and therefore aren't required for the individuals tax return.
4. If you find that the subcontractor is actually the individual you've got a can of worms on your hands!

deborahcarpenter

Yes. HMRC have requested he fill in a self assessment return. yes i am doing both corporation and personal tax returns.
The client has not kept any receipts on the advise of his previous accountant (gone AWOL) and i only have bank statements to work from!! I also only have 2 months worth of CIS statements made out to the company NOT the individual.
He also started off the company using a joint personal account with his wife and then 6 months later decided to open a seperate business account so i also have to sift through his personal account to find any business transactions.
The client was self employed until March 2010 then he set up a Limited Company and i dont think he has changed over the CIS status to the Limited Company?
Me thinks this is going to be a bit of a headache job!!!!

groundy

If he hasnt registered the company for CIS then the PDS will likely be in personal name and therefore will need sole trader accounts. You really need to see all PDS's to see what UTR has been used to correctly split between sole trader and company.

deborahcarpenter

I have 2 UTR for him, i have successfully managed to get his self assessment authorisation code but the UTR he has given me for the company which is the one shown on the CIS statements that i have doesnt match the company name or post code that HMRC have??

He says he might have another one some where to try!!! something not quite right i think!!

deborahcarpenter

Good evening all,
The plot thickens with my CIS client. It appears the Limited company is registered for CIs but it is not registered for PAYE.

He has no employees or subcontractorsbut he is a subcontractor himself. Does he have to register for PAYE or can he deduct the CIS deductions from his corporation tax due.

Again, Sorry if this seems like a dumb question but nevercome across this situation before.

groundy

He does have an employee - Himself as director is an employee. You must register a PAYE scheme to claim the CIS refund. After submitting the P35, only then can you apply to offset against any CT due. Good luck with that I have several clients still waiting refunds from 5 April 2011 all submitted prior to 19 May

deanshepherd

Bluewednesday wrote: »

apparently the carbon didn't work and the authorisation signature didn't get duplicated so it was rejected - can you believe that!!

Wow. What century are we in?

Bluewednesday

deanshepherd wrote: »

Wow. What century are we in?

I know - I'm still in shock myself!

deborahcarpenter

After several calls to HMRC and going around in circles with my client!! It appears that the company is registered on the CIS scheme, however the previous accountant did not advise him to register as an employer. He was paid under the CIS scheme for tax year ending 10/11 but has not returned a P35. I have double checked with HMRC and the company is NOT registered as an employer. I have just sent an email to HMRC to register as an employer and they will be doing this after April 2012 as they are upgrading their system. I need to return a P35 for tax year 10/11 and claim back the payments made. How do i do this now? or should i wait until he is set up as an employer?Also, when i went to submit his SA for 10/11 it appears he has a £200 penalty for not submitting a 09/10 return! This client is turning out to be a nightmare!!! Any advise much appreciated guys?

groundy

Have you tried applying for a PAYE scheme through HMRC website. I have done one recently no problem so can't understand what the supposed delay until April is.
With regards to 2009/10, do you have a copy of the accounts and is the client happy they are accurate. If so I would suggest submitted a TR based on the accounts as soon as possible.