Will CIS apply to my property ‘refurb’? do Landlords need to register?
![fotolia_1931265[1]](https://business-accountant.com/wp-content/uploads/2013/09/fotolia_19312651.jpg)
Many small scale property developers don’t realise that the Construction Industry Scheme (CIS) applies to them.
HMRC are also looking very closely at Landlords (Investors) to see if they should register too…
Terrace Hill (Berkeley) Ltd v HMRC [2015] UKFTT 75 (TC) TC 04282
Until now property investment has been excluded from CIS but HMRC say this is under review
http://www.hmrc.gov.uk/manuals/cisrmanual/cisr12080.htm
For now let’s focus on Property Developers, here are a few facts:
- Property development is a trade it includes building new buildings and improving or refurbing existing buildings
- Property developers will be contractors because they employ subcontractors – bricklayer, carpenters, painters, electricians, plasterers etc
- There is no lower limit below which you do not have to operate CIS
- Subcontractors, especially Labour Only subcontractors need to have their employment status tested
- Subcontractors need to be verified with HMRC to determine their tax status before they can be paid
- Each month the Developer will need to file a return with HMRC of subcontractor deductions
- Each month the subcontractors must be given a deduction statement
- CIS applies to all types of Developer – Individuals, Partnerships and Companies
Failure to comply means big penalties
Here are some penalty horror stories!
Brian Parkinson a gardner and lanscaper who used occasional subcontractors and got £31,500 in CIS Penalties!
The FTT heard evidence that little or no loss of tax resulted from this omission, as the amount of tax Parkinson ought to have deducted under the CIS was put at £837.90. [Brian Parkinson and the Commissioners for Her Majesty’s Revenue & Customs TC04526; Appeal number: TC/2013/00224].
This comprised £6,000 (5 x the £1,200 maximum) charged under the Taxes Management Act 1970 (TMA 1970), s98A(2)(a) and also month 13 penalties of £25,500 charged under TMA 1970, s. 98A(2)(b). – See more at: https://www.accountancylive.com/partial-win-gardener-over-%E2%80%98excessive%E2%80%99-cis-penalties#sthash.zJA59Gjv.AfCNNGRJ.dpuf
INCOME TAX – subcontractors – appellant company contracted with a third party provider to supply “operatives” – third party provider “net” for CIS purposes – company’s failure to make CIS returns – fixed monthly penalties of £28,500 – Month 13 penalties of £56,500 – whether reasonable excuse – held, no – whether disproportionate as a breach of A1P1 – Tribunal’s jurisdiction and interaction with mitigation – Bosher followed – fixed penalties upheld – Month 13 penalties set aside as excessive – appeal allowed in part
If you’re a property developer make sure you register for CIS with HMRC!
If you need help contact us
steve@bicknells.net
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Would you like to pay less VAT? have you tried Flat Rate?
Google Docs Link https://docs.google.com/spreadsheets/d/1NyVN2XW3hjpcAYFdjGPCrbeMa-HyfOcgy3eKnNj2wi0/edit#gid=68376799
Usually, how much VAT a business pays or claims back from HM Revenue and Customs (HMRC) is the difference between the VAT they charge customers and pay on their purchases.
With the Flat Rate Scheme:
- you pay a fixed rate of VAT over to HMRC
- you keep the difference between what you charge your customers and pay over to HMRC
- you can’t reclaim the VAT on your purchases – except for certain capital assets over £2,000
To join the scheme your VAT turnover must be less than £150,000 (excluding VAT) and you must apply to HMRC.
You can join the scheme:
- online – when you register for VAT
- by post – fill in VAT600 FRS and send it to the address on the form (or use VAT600 AA/FRS to apply for the Annual Accounting Scheme at the same time)
Confirmation you’ve joined the scheme is sent to your VAT online account (or in the post if you don’t apply online).
In your first year as a VAT-registered business the rate is reduced by 1% until the day before your registration anniversary.
The Flat Rate Scheme has its own Cash Basis and Retail Systems. (VAT Notice 733)
Try our calculator to see if you could save money!
steve@bicknells.net
Business Accountant 