This should probably be in the FFS thread but according to my client he can opt out of CIS simply by writing a letter to the contractor.
He is a new Ltd Co and he rang me in a panic a couple of weeks ago saying that the contractor was asking him for a UTR No so the Ltd Co could be verified for CIS. He said he hadn't had one sent by CT so I requested one to be sent to him. Just texted him now to see if he's got it and he says yeah but "I spoke to someone at work who's Ltd and he explained I can opt out of the CIS scheme with a letter so I think I'm going to do that"
Only thing I could think of was gross payment status but told him that he was unlikely to get it with being a new company, and he would still need to register the Co as a subcontractor. Was it that this guy was referring to?
"No, I send the letter to xxx who I'm subcontracting to, so they don't deduct the 20% deductions before I get paid"
I'm holding my counsel for a little while to see what develops but I am right aren't I, you can't just opt out of CIS?
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
You are right you can not opt out of CIS, if the work they are doing falls within the scheme then they need to register, as you say maybe they mean gross status.
All the letters in the world will not alter the fact that the Contractor needs to verify the subbie and apply whichever rate HMRC give which will be either 0% (gross) 20% (standard) or 30% (higher) otherwise they will be at fault and get the penalties for not going through the verification process before making payment.
It would be interesting to know what he is going to write in the letter though and what the reply is
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Plus the whole idea of the scheme was to make sure that subbies paid their taxes which would all be a bit pointless if you could just write a letter to excuse yourself!!
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
I will Doug. I've a feeling this other guy is on gross payment status, and hasn't explained it properly to my client. Would love to be a fly on the wall when he takes his letter in!!
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
If you could just opt out of CIS then everyone would be doing it!
We however do have on file (from HMRC, not the subbie themselves) copies of letters explaining that HMRC have decided that that particular sub-contracttor comes outside the scope of CIS (usually when its a grey area subject to interpretation area such as water sampling in our industry). It's possible he could mean something like this but he's got it very confused if so.
