# Anyone a CIS Subcontractor



## Vmlopes (Jan 8, 2012)

I work in the construction industry as a project manager, have recently been offered a different position with a new company and my current employer has asked me why don't I go CIS as opposed to PAYE, I do know that quite a few of the other managers are on this.

I understand that I will get no sick pay, but I don't get this anyway only SSP and holiday will be lost, but they will make this up by pushing my annual salary up to cover the difference.

I also understand that as a CIS subcontractor my employer will deduct 20% tax at source and I will have to sort out my NI, but believe this is a much reduced rate as if I was PAYE.

My question is that the only tax that I have to pay, as I am currently on the 40% tax band, going CIS seems like I could save 20% tax liability?


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## Shiny (Apr 23, 2007)

As I understand it, you still have to do a tax return but you declare the tax deductions that the employer has already deducted. So you will still be taxed at 40%, but will only have to pay the balance of 20% on your self assessment. 

The same will apply to the NI, you will be billed (Class 2, or 4, or both, can't remember!) and they will just deduct the contirbutions you have already made.

I made a mistake with NI when i first became SE, thought I was only paying peanuts for it, then got a big bill at the end of the year!

If CIS works the way you have said, it is almost like splitting your bill between PAYE and an annual return, that way you spread some of the cost over the year rather than in one lump sum. 

Don't take my word for this though, the best recommendation would be an appointment with an accountant :thumb:


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## GeeWhizRS (Nov 1, 2019)

Shiny said:


> ... the best recommendation would be an appointment with an accountant :thumb:


This 👆


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## Andyg_TSi (Sep 6, 2013)

Effectively, you will be self employed & you will be required to complete a tax return.

Once you've done your accounts and worked out what Tax/Ni is due on your total taxable earnings, and Tax/NI deducted at source via the CIS scheme is credited against your total liability

You will then be liable to pay the difference

Remember too, youll be liable for Class 2 & Class 4 NIC instead of paying Class 1 NIC


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## Andy from Sandy (May 6, 2011)

Start here perhaps

https://www.gov.uk/what-is-the-construction-industry-scheme


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## organgrinder (Jan 20, 2008)

You won't save much in NI. Class 4 NIC is 9% as opposed to Class 1 NIC of 12% which you pay as an employee. However Class 4 NIC starts at a lower level.

As others have said you will still pay 40% on the earnings over the higher rate tax threshold and you will need to be disciplined enough to put that money away.

If you earn over £85K you would also have to register for VAT.

You will also lose any pension contributions and your "employer" will save 13.8% employer's NI. However your position is exactly the kind of arrangement that HMRC gets interested in, when someone finishes on a Friday as an employee and starts on Monday as self employed.

Don't believe all the pub talk about deducting expenses for use of your car etc. HMRC are clamping down on this too and depending what you do on a day to day basis and where you do it, you may be considered to have a permanent place of work or somewhere you go on a habitual basis which then precludes you from claiming any expenses travelling to those places from home.


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## James_R (Jun 28, 2007)

I understood if you're self employed you're only allowed to do a certain amount of turnover for one client.
I can't remember if its 25% or 50% ?

Otherwise if you do 100% of your work for the same company its regarded as tax avoidance on the contractor and employers part.

Again, worth half hour with an accountant


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## organgrinder (Jan 20, 2008)

James_R said:


> I understood if you're self employed you're only allowed to do a certain amount of turnover for one client.
> I can't remember if its 25% or 50% ?
> 
> Otherwise if you do 100% of your work for the same company its regarded as tax avoidance on the contractor and employers part.
> ...


There isn't a specific percentage and the realities of the arrangement will determine the relationship. However if all the work is for the same main contractor it is highly unlikely to pass HMRC's test. The only good news part of that is that it is the engager (payer) who needs to get the employee/employer relationship right with an individual and they will suffer if HMRC decide it was just disguised remuneration. If you operate as a limited company though there are plenty more things to consider under new rules coming in from April 2020.


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## mike13098 (Jan 21, 2012)

my company are CIS reg'd and are taxed 20% at source

What you're being asked to do would red flag HMRC if they look into it. Why have you decided to come off PAYE and invoice more work for the same main contractor (your ex-employer)

you are still liable to 40% tax it's just broken down differently. The only way you would stop NIC payments would be to become a Ltd Co. and trade under a company name and you as an employee of the company


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