New step-by-step guide to the CIS
Most subcontractors, already registered with HM Revenue & Customs, will simply move over to the new scheme on April 6 2007. Subcontractors who do need to register for new CIS are those who:
- are not registered
- are starting work in the industry after April 5 2007, or
- held temporary cards that expired before April 6 2007 and were not renewed.
Step 2: Registering with HM Revenue & Customs…
If the subcontractor isn’t registered with HM Revenue & Customs, and HMRC has no previous record of them, they may be asked to call in to a local office with two forms of identification for an ID check. This is a one-off process.
Step 3: Verifying a subcontractor’s status with HM Revenue & Customs…
Contractors who are employing a new subcontractor will first need to verify them with HMRC to find out how they should be paid. This can be done over the phone on 0845 366 7899.
During verification, HMRC will tell the contractor whether to pay the subcontractor gross, net of the standard deduction or net of the higher rate of deduction. If a subcontractor isn’t registered with HMRC, a higher rate of deduction will be made from payments.
Step 5: Checking if a subcontractor should be paid gross…
To qualify for gross payments, a subcontractor must past three tests: the business test, the turnover test and the compliance test. Subcontractors need to contact HMRC on 0845 366 7899 and provide evidence that they qualify for these tests, before they can be paid gross by a contractor.
Step 6: Making monthly returns…
Contractors have to make monthly returns to HM Rvenue & Customs detailing how much they have paid subcontractors who are working for them, and how much they have deducted from the subcontractors' payments. Nil returns are required but these can be reported over the telephone.
Hardhatter has a dedicated news area relating to developments surround the new CIS. You can access the information and subscribe to receive email alerts to new stories - free of charge in the Hardhatter CIS news area.
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Susie Hughes
The Editor © Hardhatter 2007