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bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I am looking to take over my dads building company and leave

Customer Question

I am looking to take over my dads building company and leave my job, I need to know the best way of taking on an employee ie CIS or PAYE as the building trades is up and down and I don't want to be paying out wages if we have no work on.
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.

Can you tell me if this is just a general question about the difference between PAYE and CIS or do you have a specific function for somebody to do in your company?
Customer: replied 1 year ago.

I need to know the best option to employ some one as ive been told that you can no longer employee people on a self employed basis with in the construction industry.

Under CIS as I understand people need to be subcontractors and if employed by me continuously then this will not be right but under PAYE I have to pay sick and holiday etc.. and need to know the best tax scheme for employing a trades man for my small business

Expert:  TonyTax replied 1 year ago.
Thanks.

Leave this with me while I draft my answer. It will takl a while so please bear with me.
Expert:  TonyTax replied 1 year ago.

Hi again.

Whoever told you that you can no longer take on people on a self-employed basis was wrong. There has been no noticeable change in the HMRC attitude towards sub-contractors in the recent past that I am aware of. Normally, the only people who are employees in a building company are the directors and any administration staff.

It would be difficult to justify treating somebody who only worked for you in an administrative role as self-employed, though I have seen it done. The CIS scheme exists because it regulates the tax treatment of sub-contractors and is a recognition that the building industry is a seasonal business and that it would not be viable to have building workers on employee contacts when there would be certain parts of the year when no work could be done.

As you are aware, if you have an employee, then you as the employer have responsibilities starting with the PAYE regulations which you can read about here and here. Then there are the rights to sick pay, holiday pay, redundancy pay, employer National Insurance Contributions, the risk of employment tribunals etc.

The CIS responsibilities are set out here. The reporting and administration requirements are slightly less onerous than those for PAYE employees in my view but you won't have all a responsibility for sick pay, holiday pay, redundancy pay, employer National Insurance Contributions or the risk of employment tribunals etc. I have had many sub-contractor clients who have worked pretty much for a single contractor year after year with no problems causes by HMRC. I also have acquaintances in the tax and accountancy world who have recently taken on small building company clients with in excess of a dozen regular sub-contractors and plans to take on many more for major contracts.

If the tradesman that you wish to take on works on domestic contracts such as on private homes and non-building site locations, then he can invoice you and be paid outside the CIS scheme. I see no problem with such an individual being used on a self-employed basis.

I hope this helps but let me know if you have any further questions.

Customer: replied 1 year ago.

HI many thanks but my understanding was that you can not pay a sub contractor the same amount of money week in week out, and if I take on an apprentice how would that work ?

IF they invoice me every week for the same amount ie 6 days wages a week then is this still ok under the CIS scheme

We work on domestic refurbs and

extensions etc..

Customer: replied 1 year ago.

According to the gov web site self employed need to be under CIS ?

Expert:  TonyTax replied 1 year ago.
Not all building work is covered by the CIS scheme. I've had clients who specialise in domestic works on houses and flats with the client being the homeowner. Some of taht work can be outside CIS. See Appendix A, Appendix B and Appendix C here for what does and doesn't constitute construction operations.

If you pay an apprentice tradesman a regular weekly sum regardless of what he does and there is alot of supervision including training then it will be hard to claim that he is self-employed. If he was employed on an ad-hoc basis and was already experienced and possible had other people he worked for, then that makes it more legitimate to have him treated as self-employed.
Customer: replied 1 year ago.

HI im not looking at a way to avoid people paying the tax I need to know the best way to set this up, to be honest I could have looked at the HMRC site and been in the same potion as I am now, still confused

Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

I am of the opinion that without question an apprentice would count as an employee and must be paid under PAYE arrangements. If you are a Diirector of the company you too are an mployee per se and must be remunerated thhrough PAYE as must any other director.

Otherwise the employees you use on an ad hoc basis could be classified as self employed sub contractors and paid under CIS deductions. Where the total cost of the job does not exceed GBP 1000 excluding materials the payments can be made outside CIS.

I regret that in this trade you must be fully conversant with the CIS scheme. It is impossible to operate without a thorough knowledge of the scheme and how it applies to you here. Full details and instructions can be found here:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/424127/cis340.pdf

I am so sorry to have to rain on your parade. A lot of time will be needed with a wet towel round your head and a wet Sunday afternoon to absorb the ramifications of the CIS scheme.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3106
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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