The scheme is complicated for both contractors and subcontractors. Subcontractors already registered for self-assessment are also required to inform HMRC if they are also registered as a CIS subcontractor in order for them to benefit from deducted 20% tax rather than 30% for non-CIS-registered subcontractors.
Subcontractors also have to wait to complete personal tax returns to potentially receive any refunds on tax over payments.
Contractors have the pain of verifying all their subcontractors through the HMRC CIS system to make sure they are deducting the correct tax at source.
“I’d improve CIS by potentially allowing subcontractors to claim any potential tax over payment on a monthly basis to minimise impact on cash flow. Contractors could be allowed to reverse charge the CIS suffered on their invoice to the final user in the same way that VAT is reverse charged in the industry”, said Erdingsworth Business and Tax Advisor, Tom Hamilton.
Verdict: CIS could be improved by allowing subcontractors to claim any tax over payments on a monthly basis and enabling contractors to reverse charge CIS, reducing impact on cash flow.
