CIS Administration and the Risks of Getting it Wrong
The Risks to your Business
Time consuming and rigid reporting requirements
Major disruption to your business from the loss of Gross Payment Status
Whilst HMRC’s CIS scheme has seen a number of revisions over the years, with the last being in 2016, It remains a time consuming and complicated process for all contractors large or small.
The Burden of CIS Administration
Your responsibilities are to:
- Verify each sub-contractor with HMRC before you pat them, and
- Calculate and deduct CIS tax in accordance with the verification details
- Inform the sub-contractor the amount that they will be paid
- Submit electronically your CIS300 report by the 17th of each month, detailing all payments made to, and deductions collected from sub-contractors.
- You must submit a “nil return” even if no sub-contractors are paid.
- Provide a payment statement to the sub-contractor at least monthly.
The Risk of CIS Penalties
The current penalties for failure include:
- Failure to submit monthly return, (including a nil return) by the correct date, £100
- Monthly return is still outstanding after 2 months, an additional £200
- Monthly return outstanding after 3 months = additional £300 or 5% of the CIS deductions from the return (whichever is higher), and additional increases for returns that remain outstanding at 6 and 12 months.
Additionally, HMRC can levy up to £3,000 per monthly return submitted if you incorrectly tick the self-employed status declaration when your sub-contractors should have been employed.
The loss of Gross Payment Status can have a crippling effect on a company’s cashflow and result in:
- Up to 20% of a company’s earnings being held by HMRC.
- Deductions are held until the following financial year
- A significant drop in your credit rating
- A loss of company’s credibility and ability to trade
How could you lose Gross Payment Status?
Note that a business will fail the scheduled review if:
- any contractor returns have been late on four or more occasions;
- any one contractor return is over 28 days late;
- any PAYE or CIS payments have been late on four or more occasions;
- any one PAYE or CIS payment is more than 14 days late;
- any self-assessment payment is more than 28 days late;
- any Corporation Tax payment is more than 28 days late, or is outstanding at the date of the review;
- a P35 is still outstanding at the time of the review;
- any self-assessment return (income tax or Corporation Tax is outstanding at the time of the review; or
- any payment of £100 or more due to HMRC is outstanding at the time of the review.
The sheer volume of situations that could give rise to a “scheduled review failure” makes it easy for a business to put its gross payment status at risk – especially as the review process is largely automated. Four or more late contractor returns, for example, will trigger an automatic “ad hoc” review irrespective of when the next scheduled review is due to take place.
What is the solution?
By engaging EEBS we remove the vast majority of your CIS compliance responsibilities, thus reducing the chance for error and the associated costs and risks.
All you do is verify us once, and complete your monthly CIS return detailing EEBS as the sub-contractor – saving you time and a lot of aggravation.
Additionally, EEBS will:
- Verify each sub-contractor with HMRC
- Calculate the sub-contractors CIS tax
- Inform the sub-contractor of the amount that they will be paid
- Include all of the engaged sub-contractors on our own status submissions to the Revenue
- Provide the sub-contractor with both a payment statement for each time they are paid, plus an annual CIS deduction statement.
Other benefits of appointing EEBS to engage with sub-contractors on your behalf include protecting your business from Employment Rights claims, i.e. holiday pay, pension contributions, unfair dismissal, discrimination and parental rights plus a massive reduction to your CIS administration. After verifying us with HMRC you replace the sub-contractors that you previously reported on your CIS300 with EEBS.
“We are confident that we can rely on EEBS to keep us up to date with any changes and ensure we continue to comply.”
Christine Shearing, Kenwood Groundworks
"J&J Windows & Doors Limited have been using EEBS Limited to pay my colleagues and I for over 6 months and I can quite honestly say that the service EEBS provides is superb! It allows me to remain self-employed, they ensure that I'm verified with HMRC, that my CIS tax is calculated correctly and most importantly that my wages are always paid correctly and on time. I would without a doubt recommend EEBS to friends, family, and colleagues."
James Last, J&J Windows & Doors
“I can call on EEBS when required without the worrying of being tied into an agreement.”
Peter James, Pete’s Landscaping
"We have used EEBS for our wage processing for around 3 years now. We were unhappy with the previous company as they felt 'too big' and did not provide a personal service at all. I am extremely happy with EEBS and can honestly say all their staff are pleasant, conscientious and an absolute pleasure to deal with. I cannot recommend EEBS enough, they thoroughly earn their (reasonable) fees and enable us to focus on more commercial and day to day aspects of running our company."
"We have used EEBS for 7 years now and we cannot fault their service. They keep us up to date with new legislation and regularly carry out compliance reviews. Their staff are friendly and knowledgeable and the processing rates are fair."
"We have used EEBS for 4 months now and what a delightful team. Toni & Colette have been nothing but "BRILLIANT" They have bent over backwards to resolve queries and are always at the end of the telephone... Thank you EEBS for being FANTASTIC!"
"Would highly recommend EEBS, we have used a few payroll companies in the past but by far these guys are the best. Always so helpful and very knowledgeable, such a great company to work with."