Hi, I wonder if anyone could shed some light on a scenario for me.
I have a client who is a property developer. He has an invoice from a contractor who is registrered with Cis as a partnership, they also have one employee on (Paye & Ni) The invoice for one month comes to (lets say) £4000 (100% labour i.e no materias etc) made up from hours worked by all three builders.
Does my client pay 20% of the entire invoice or should the Cis only apply to the two partners and not the employee? Is anyone being 'short changed' by this scenario?
Hope its not a stupid question, im very new to this. but something doesnt look right here.
I would say the 20% deduction applies to the entire invoice as how the contractor pays the other "staff" is really nothing to do with your client - just treat it the same as any other invoice from a contractor.
However, what confuses me is that HMRC say you can only submit Cis returns for Cis registered sub-contractors, as he is on the companies/partnership payroll he is not Cis registered, it also states that the contractor/my client is responsible for this, or does the 'Partnership' status change things, I have failed to find anything on the HMRC website.
Also if my client is submitting 20% of the employees' 'wages' and the employee is paying his Paye & Ni for that same period, does this not mean it is paid twice to the HMRC, presumably for the 'partnership' to have it refunded at the end of the year. or have I really missed the point and over complicate matters?
The internal arrangements of the subcontractor are anecdotal knowledge which never affects how your client should treat the deductions. Your knowledge that some workers are on PAYE and some are partners isn't relevant.
Deduct the entire labour element of the invoice at the HMRC specified rate. Let the subcontractor worry about how they claim back their CIS suffered to meet their payroll costs.
-- Edited by Tom McClelland on Tuesday 6th of November 2012 08:13:15 AM
I think you're deducting CIS from the partnership, not from the individual workers.
The matter IS oddly complicated by the fact the the partnership has a UTR and so does each partner, if memory serves. I've never understood what HMRC is trying to achieve by recording UTRs of individual partners when a partnership invoices someone under CIS, but maybe the partnership tax experts would have an opinion on that.
