CIS Sub-Contractors - Employed or Self-Employed?

TrinnyWyn

CIS Sub-Contractors have their tax deducted prior to payment at 20%.

 Currently there is an assumption that CIS Sub-Contractors will be classed as self-employed under the current initiative published by the Government.

However I heard an Employment lawyer state that they may fall under the criteria of employee because tax is effectively deducted at source, similar to PAYE. 

Obviously this could have huge implication for those under the CIS Scheme who cannot show the requisite tax returns as they could be Furloughed. It also has implications for CIS sub-contractors who are assuming they fall under the self-employed criteria and are awaiting the June payments.

I've asked for clarification from my MP on this matter - he is unable to confirm this. The HMRC advise is not clear either by telephone or on their website.

I've asked for a question to be raised to the relevant Minister but who knows whether this will happen...

Has anyone on this Forum asked this question and had a definitive answer?

whizzywoo

Sub-contractors who have income tax deducted under the CIS system have always been self-employed.  The tax deducted is on account of the self-employed tax they have to pay on their profits.
They have to complete self assessments tax returns each year and any income tax deducted at source is off set against the income tax due.  In many cases they are due a repayment.

They are not employees - as far as I am aware they don't get holiday pay or Statutory Sick Pay.

Jeremy535897

There are lots of self employed jobs that have characteristics of employment. Look at the fuss over Uber and holiday/sick pay. I think HMRC will follow the tax treatment and if you have declared your CIS income as self employment, they will accept that, as they have done for years.

TrinnyWyn

Thanks Whizzywoo - They do indeed complete self assessment returns, and they don't get holiday pay or sick pay which under normal circumstances would deem them to be self-employed. My partner works as a Sub under the scheme. Perhaps I'm over-thinking this but I did hear an employment lawyer state on  BBC Radio that this was a grey area and actually advised that the sub should speak to his current 'employer'. I just don't want a bombshell in June when a lot of sub-Contractors might be told they should have contracted their 'employers' to be furloughed. Its probably nothing but I thought I'd put the question out there as no-one has covered in depth and it is potentially a grey area. 

Jeremy535897

The Government had it on the to do list, as I know they believe the system is abused, but I doubt we'll see any change in the short term.

TrinnyWyn

I agree that the Government are very keen to push everyone into employment (IR35) - this has been deferred as you rightly say. The CIS scheme stands out as different and has not been explicitly commented on in relation to what is currently developing. The HMRC have told me they are 'awaiting clarification' on this matter from the Government - that is a concern...perhaps I just spoke to an HMRC employee who had had enough that day!

Jeremy535897

No doubt. See from CIOB website:

"The Chancellor’s Budget 2020 contains a raft of other announcements set to affect and impact the construction industry and wider built environment, some of the most relevant include: 

The Green Book review 

It has been announced that government are reviewing the Green Book which provides guidance issued by HM Treasury on how to appraise policies, programmes and projects. We expect this will have a more regional focus once reviewed and a lot of the calls we made in the Real Face of Construction report, especially around better understanding value, ties into this review. 

Tackling Construction Industry Scheme (CIS) abuse

To prevent non-compliant businesses from using the CIS to claim tax refunds to which they are not entitled to, the government has announced they will legislate to avoid CIS abuse. In addition, government will also publish a consultation which introduces option on how to promote supply chain due diligence. "

TrinnyWyn

Still not convinced I have an answer to this question relevant to the payments for Furloughing or self-employment. I've asked the question of my MP so perhaps that will provide a definitive answer.

Jeremy535897

Everyone on this forum believes CIS sub-contractors are self employed for the purposes of the self employment grant. Sub contractors who have filed tax returns showing the income as self employed, and had refunds from HMRC on that basis, should be eligible.

TrinnyWyn

Thanks, I'm sure you're correct but no-one on this Forum (as far as I'm aware) works for the Government or HMRC or is an Employment Lawyer (I was 10 years ago but it is no longer my legal specialism).

Jeremy535897

I know lawyers are naturally cautious (I have worked with many senior lawyers in a past life and argued such points with them), but I say again: don't worry on this point.