CIS scheme

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mira2602
mira2602 Registered Posts: 29 Regular contributor ⭐
in General accounting discussion
I need a bit of help here, please. Friend of mine plans to register as self employee, under CIS scheme. He is gona get paid Gross, but can't register as subcontractor with gross payments as he fails the turnover test.
Therefore, can he be a contractor, receives money gross, and than pays himself as subbie (with 20%) deduction?
Any suggestions, please?

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  • Gem7321
    Gem7321 Registered Posts: 1,438 Beyond epic contributor 🧙‍♂️
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    Why is he being paid gross? If he is working as a subcontractor for a contractor the contractor should verify his status and make CIS deductions as necessary - end of story! If the contractor fails to meet their CIS obligations then your subbie will have to pay through self assessment.

    I don't really understand what you mean about registering as a contractor to receive money gross to in turn pay himself. He should register as a contractor if he is using subbies himself, but this won't resolve his gross status issue. The same CIS rules apply to a contractor who is also a subcontractor.
  • peaman
    peaman Registered Posts: 123 Beyond epic contributor 🧙‍♂️
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    No, you are not allowed to do this. Plus it won't help as he will need to call HMRC to verify his status and they will tell him to deduct 20% tax.

    You will just have to claim the CIS tax deducted at source when you prepare his tax return.
  • mira2602
    mira2602 Registered Posts: 29 Regular contributor ⭐
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    Hiya, thanks for your replies. I tried to find out more details, ...well the way I understand it, that he is gonna worko for himself...find a private work, for example redecorate someones house, so he is gonna get paid gross. Where the deductions takes place, than?
  • Gem7321
    Gem7321 Registered Posts: 1,438 Beyond epic contributor 🧙‍♂️
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    In that case he isn't working for a contractor so CIS doesn't apply. He will pay tax through self assessment.
  • T.C.
    T.C. Registered, Tutor Posts: 1,448 Beyond epic contributor 🧙‍♂️
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    Yes, CIS is set up for contractors to deduct 20% from the labour element of a sub-contractor's invoice. It only applies with contractors. Every contractor who takes on subbies much register as a contractor and every subbie who works for a contractor needs to register. When a contractor takes on a new subbie then he must verify him with HMRC to check his tax treatment (usually 20%, but could be nil or 40%). When a self-employed person works for a private individual none of this applies. I hope that helps to clarify the situation. I LOVE CIS :001_smile:

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