If you are a contractor working in the construction industry you are likely to rely on the services of subcontractors – but what rules do you need to consider when paying them?
Contractors and other businesses who regularly use the services of subcontractor must keep track of their payments as work of subcontractors applies to the Construction Industry Scheme (CIS).
CIS is a scheme governed by HM Revenue & Customs (HMRC) that ensures that employers take account of tax on subcontractors’ pay.
The pay of subcontractors may need to be reduced to reflect this, but the reduction goes towards their income tax payments and National Insurance Contributions, so it is critical to get it right.
Are you a contractor?
A contractor is a business that pays subcontractors for construction work. Contractors could be building firms, government departments or any business.
A business is also a contractor if it has spent more than £3 million on construction within the past 12 months.
What are the penalties?
Non-compliance or submitting late reports can result in fines.
A report that is one day late can result in a £100 fine, while a delay of two months can lead to a fine of £200. If a report is 12 months late, the employer must pay £300 or five per cent of the CIS reductions on return, whichever is higher.
The penalty will be cancelled if the employer lets HMRC know that subcontractors were not paid in that month.
How our construction team can help
Whether you work within the construction industry or require a property to be built, the project must be completed on time and within budget. Plus any subcontractors used will need paying on time too.
With such projects often proving costly and complicated, it pays to work with a company that specialises in construction law and appreciates the commercial impact of the advice provided.
At Palmers Solicitors, we can help prevent disputes arising through the professional drafting of contracts and other agreements. However, we also appreciate that projects do not always run as planned, which is when we can advise on resolving problems through negotiation and mediation.
Should this not be effective, we can then act on your behalf or act in your defence.
To find out more about how we can help you, please contact us.