I had a meeting with a sub contractor last night who is about to become a client, once I have completed letter & terms today, and he asked me something about CIS which I was a but unsure of the answer
His/my query is.
He is providing sub contract labour to a contractor who is currently paying him without the 20% deduction (my subcontractor is not registered for gross receipts under CIS). On the same contract my sub contractor is also paying another sub contractor to work for him and my sub contractor is deducting the 20% form his payment. In summary for example:
Contractor pays £2000 to Sub contractor A
Sub contractor A (my client) receives £2000 from contractor.
Sub contractor A pay Sub contractor B £1000
Sub contractor B receives £800 from Sub contractor A (£1000 less £200 CIS)
My query is, should the contractor be deducting 20% from his payment to my client (sub contractor A)
I would say yes, of course the contractor should be deducting 20% from any labour payments.
I've recently taken over the books for a contractor, and their previous bookkeeper had decided not to bother particularly with CIS. One of the subbies had gone to HMRC claiming that as they were not registered for gross payments under CIS and they had provided their UTR & NI to the contractor, they could assume that all payments they received from the contractor had had the appropriate deductions & payments made for CIS. HMRC agreed and the contractor has had to pay out the additional amount to HMRC as though they had made deductions before making the payments, effectively meaning that the subbie received more than his invoice amount for labour by 20%.
Guess you can see why the previous bookkeeper is no more!
I know none of us are perfect (though I may be corrected on that ) but some so called bookkeeping work really does leave you quite speechless. How can you just not bother with CIS
Thanks for the answer, this was my first thought but you know what it is like when you are put on the spot about something you weren't expecting and you just start to doubt yourself
I get confused sometimes with CIS as to when a job is subject to deduction and when it isn't! Could it be that the job your sub contractor client was doing for the contractor may not have been under the scheme?
One of my clients has a landscaping business that comes under CIS - if he is clearing land ready for new building works such as a new supermarket - and calls in another landscaper to chop down a tree, that is definately contracted work and therefore CIS deductable (unless the subby is gross, obviously) because it is clearing land on a commercial basis - but if he's doing a landscaping job for a domestic manor house and calls in the same landscaper to cut down a tree - then that wouldn't come under CIS so would not be deductable - at least that's my understanding.......could it be that your client was contracted for a job that was not deductable?
) but some so called bookkeeping work really does leave you quite speechless. How can you just not bother with CIS 
