CIS4 Contractor Tax Deductions

aj9648

Hi

I work in the construction industry. A lot of the guys I work with come under the CIS4 scheme and they pay only 18% tax.

I was not sure what this was all about? Can anyone explain? Is there an advantage of moving to this scheme in the new tax year? What happens to NI?

I currenlty earn around £30K - is this something I should consider?

Thanks

amy

i think the cis scheme ends at the end of this tax year but click on the link its got more info..

ttp://66.102.9.104/search?q=cache:J9dypxdIukcJ:https://www.hmrc.gov.uk/cis/+cis&hl=en&ct=clnk&cd=3&gl=uk&client=firefox-a

aj9648

I understand that it ends but Contractors will still submit Subcontractor details online to the HMRC for verification, and they will respond with a Verification Number and the tax rate to be applied i.e. still taxed at 18% which is consiberably lower than what I am paying at the moment

So there must be some catch???

WHA

aj9648 wrote: »

So there must be some catch???

Yes, there is.

The 18% is only "on account" of the tax - they still have to do the annual tax return and tax/nic is still computed on the same basis as someone who is paid gross. The totals of the 18% deductions are set against the tax and NIC and there may be a repayment or payment due.

Also note that the 18% increases to (I think) 20% from 6/4/07.

amf

Yes, the CIS deduction increases to 20% from the start of 2007/8. The CIS scheme is not ending.....it is changing in order to reduce the administrative burden placed on contractors, if you believe the HMRC propaganda. Unfortunately HMRC does not explain how this burden can possibly be reduced by forcing contractors to produce more bits of paper (monthly returns etc.)!