anna Posted January 25, 2017 Share Posted January 25, 2017 Hi, Not sure where to post this question really. I was just told by our accountant that we should register to CIS and our self employed builder has to do the same to be able to start the work. If you hire builders to do the building work, do you check if they are CIS registered? Link to comment Share on other sites More sharing options...
jamiehamy Posted January 25, 2017 Share Posted January 25, 2017 Who are you in the context of CIS? What your contractor does in terms of CIS is surely not your concern? Link to comment Share on other sites More sharing options...
Temp Posted January 25, 2017 Share Posted January 25, 2017 (edited) Is he talking about this... https://www.gov.uk/what-is-the-construction-industry-scheme I don't believe a self builder is considered to be a contractor. So no need to collect money from sub contractors. See also.. http://www.property-tax-portal.co.uk/taxarticle54.shtml It refers to property developers being contractors but I don't think self builders count as property developers. Quote The key is, do they earn their profits by doing building work – either by new builds which they then sell, or by buying an existing property and improving it and selling it on. A “Buy to let” investor will probably not be a “contractor”, because although he may use the same tradesmen to do work on his properties, he makes his income from renting them out, not from selling them – he is an investor, not a trader. So remind us what you are building? Edited January 25, 2017 by Temp Link to comment Share on other sites More sharing options...
anna Posted January 25, 2017 Author Share Posted January 25, 2017 I'm sorry. I wasn't clear enough in the description of situation. Me and my husband bought a plot of land . We want to build 2 houses there for sale. We were advised to set up a limited company for tax purposes to do it. We did it. So as far as I know , we are now contractors and our builder is a subcontractor. He's doing most of the jobs for private people, no invoices required etc..... so he is not very happy about the idea of registering to CIS. Link to comment Share on other sites More sharing options...
Temp Posted January 25, 2017 Share Posted January 25, 2017 It can be quite hard to make a profit building houses. Hope you have a good handle on the likely costs. I purchased a plot from a builder. When I asked him why he was selling he told me that he didn't think he could make any more money by actually building the house. We got permission for a different/better house for us to live in. I reckon we broke even at best and probably made a loss. The builder was right. Clearly we overpaid for the plot but it was/is a pretty special plot and there was a lot of competition from other self builders. Pretty sure you will also have to register for VAT and submit quarterly returns as the self build VAT reclaim scheme isn't available to you. Do not be tempted to rent out the houses if you can't sell them as that may mean the VAT has to be repaid. 1 Link to comment Share on other sites More sharing options...
jamiehamy Posted January 25, 2017 Share Posted January 25, 2017 Hmm. It's more of a business question than self build I suppose. I would go with accountant guidance tbh - they know more. Ultimately it may be a grey are but caution should be exercised - erring on the cautious side. 1 Link to comment Share on other sites More sharing options...
anna Posted January 25, 2017 Author Share Posted January 25, 2017 We are registered for VAT. I'm still an optimist so far:)) Link to comment Share on other sites More sharing options...
anna Posted January 25, 2017 Author Share Posted January 25, 2017 The problem is the builder would like to stay in grey area and we would like to be in a black and white one -) Link to comment Share on other sites More sharing options...
PeterW Posted January 25, 2017 Share Posted January 25, 2017 So change builders. Or he provides you with invoices. Either answer to that is probably not one you want to hear but if you don't go by the book then HMRC will just come after you for what he technically should be paying anyway. 1 Link to comment Share on other sites More sharing options...
ProDave Posted January 25, 2017 Share Posted January 25, 2017 I'm registered under the CIS scheme as a contractor. I had to join the scheme when I was doing a fair bit of work as a subcontractor for a building company. It meant they deducted tax at source from my payments and I had to declare the CIS tax paid on my tax return and it all worked out at the end of the year, i.e. if I had over paid tax through the CIS deductions I got a refund. I have never heard of a self builder having to do this in order to "employ" a sub contractor. 1 Link to comment Share on other sites More sharing options...
jamiehamy Posted January 25, 2017 Share Posted January 25, 2017 12 minutes ago, ProDave said: I'm registered under the CIS scheme as a contractor. I had to join the scheme when I was doing a fair bit of work as a subcontractor for a building company. It meant they deducted tax at source from my payments and I had to declare the CIS tax paid on my tax return and it all worked out at the end of the year, i.e. if I had over paid tax through the CIS deductions I got a refund. I have never heard of a self builder having to do this in order to "employ" a sub contractor. I think in this case the Op is a developer rather than a self builder. However does a developer require CIS? They are looking to make profit from subsequent sale rather than as a contractor. A builder that operates without invoices is one I'd avoid. What else is he/she dodging? Link to comment Share on other sites More sharing options...
Jeremy Harris Posted January 25, 2017 Share Posted January 25, 2017 Anna, because you are building more that a single house and are VAT registered, you are a developer, as Jamie says above. The question WRG to CIS is then whether you are a contractor, or whether you are just hiring sub-contractors, If the latter, then you don't need to bother about CIS, if the former you do. Normally a developer wouldn't also be a contractor, the most common exception is probably small builders who build one or two houses to sell. Earlier today I saw the van of a local builder that I know does "speculative builds" like this, if he's still there when I drive past again later I'll ask him, as he's a nice enough chap and I've helped him out with some supplier advice, so he owes me a favour. As a developer it means you have to follow all the rules that apply to small developers and you don't do things with regard to VAT and other taxes the way a self builder would. You can't, for example, follow the guidance on VAT that applies to self-builders, but you can reclaim your VAT with your regular VAT return, so in that respect you are better off as a developer. However, there are also some downsides. Self-builders can get a self-build warranty from one of the warranty providers, you cannot and will probably have to register/join one of the warranty scheme providers in order to be able to sell the houses with a warranty (which is quite commonly a lender requirement). You can get an alternative to this, like an Architects Certificate or similar, but I think buyers might be a bit wary of a developer who isn't registered with one of the big name providers, like NHBC (not that for a moment I'd recommend them, my experience with them was dreadful) 1 Link to comment Share on other sites More sharing options...
Wrekin1 Posted January 25, 2017 Share Posted January 25, 2017 4 hours ago, anna said: I'm sorry. I wasn't clear enough in the description of situation. Me and my husband bought a plot of land . We want to build 2 houses there for sale. We were advised to set up a limited company for tax purposes to do it. We did it. So as far as I know , we are now contractors and our builder is a subcontractor. He's doing most of the jobs for private people, no invoices required etc..... so he is not very happy about the idea of registering to CIS. I've just had (this morning) exactly the same correspondence with my accountant. My brother and I are in the same situation as you and your husband and are considered developers as we are building 3 houses for sale and apparently, as such, we are responsible for checking that all our contractors are registered for tax appropriately. I'd rather take this conversation offline at the moment but am happy to share some of the feedback and thoughts we have had on this type of situation. PM me if you would like to follow up. Similarly with anyone else who picks up this thread now or in the future. 1 Link to comment Share on other sites More sharing options...
Steptoe Posted January 25, 2017 Share Posted January 25, 2017 (edited) The answer is simple, Like @ProDave I am CIS registered, and I am a Ltd company, If I do a one off job for a private person then they simply pay my invoiced amount, the fact you are building as a Ltd Co now means you are just that, a company (ie, a contractor) , sub-contracting someone to do a job for you, The CIS itself isn't very difficult, but it will cost you £100/month iirc, and you must file your statements of deductions monthly, even if they are £0 . You may have got away with building the two houses without this if you hadn't gone Ltd, And, your builder (or anyone else for that matter) , MUST provide you with a monthly invoice, otherwise you CANNOT pay him, legally. make sure your accountant tells you EXACTLY who (the proper company name) the invoice must be made out to. EDIT : you must make sure anyone doing work for you gives you their UTR number (unique tax reference) , that way you only deduct 20% , otherwise you deduct 30% Edited January 25, 2017 by Steptoe 1 Link to comment Share on other sites More sharing options...
Barney12 Posted January 25, 2017 Share Posted January 25, 2017 If the self employed builder is your "only" contractor. I.e. He will be employing all other sub-contract trades then he is the main contractor. In that scenario you would normally have a contract. If however, you are employing various trades then you are the contractor and will need to register for CIS as your accountant has advised. Or put another way; if the ONLY invoice your limited company is going to receive is from your builder as "main contractor" then you do not need to worry about CIS (but he certainly does!). Or if you will have multiple invoices from various "sub contractors" then you are the "main contractor" and have to use CIS. however, even if you are not a "construction" company. if your turnover on "construction" related services is in excess of £1m you still have to register for CIS. Overview of CIS: https://www.gov.uk/what-is-the-construction-industry-scheme As a Contractor: https://www.gov.uk/what-you-must-do-as-a-cis-contractor As a Sub Contractor: https://www.gov.uk/what-you-must-do-as-a-cis-subcontractor Just to really confuse matters you can register for gross payment status as a subcontractor, subject to certain conditions: https://www.gov.uk/what-you-must-do-as-a-cis-subcontractor/gross-payment-status 1 Link to comment Share on other sites More sharing options...
anna Posted February 10, 2017 Author Share Posted February 10, 2017 Thank you very much for all your replies. I thought I am a developer, not a contractor. But accountant said we are a contractor. We can get invoice only from him, or from his men, too. It's our choice. It won't be near £1m for sure:))) Link to comment Share on other sites More sharing options...
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