Construction Accounting

The regulations for contractors and subcontractors working within the UK construction industry has always been a bit quirky, but now there is added complexity on the horizon with the introduction of new Supervision Direction, or Control (SDC) legislation from April 2017.

This will mean that construction workers supplied by a recruitment agency or other “intermediary” will no longer be able to receive payment through the Construction Industry Scheme (CIS) unless they are able to demonstrate that they fall outside the supervision, direction, or control of the client and anyone else associated with the project or firm. From 6 April 2016, the same test applies to assess a subcontractor’s right to claim tax and National Insurance relief on their business expenses. Read the HMRC PDF here.

Given the complexity of CIS and the changes that will affect how subcontractors operate within the construction industry, it should be borne in mind that the onus is now on the employer of subcontractors to apply the legislation. If an employer wilfully fails to apply the legislation then a fine will result.

CIS is complex and when errors are made, even once, punitive penalties and removal of status results. Ideally, therefore you will seek the expertise of a specialist CIS accountant and tax planning. An experienced team of accountants and tax advisors such as that found at Target Accounting, will provide expert knowledge of CIS accounting, and definitely ensure you remain compliant. We can:

•  Advise you on your status
• Advise on subcontractor or employee status (or both)
• Verify subcontractors with HMRC on your behalf
• Keep your records in good order
• Manage payroll
• Manage acquisitions and other non-compliance roles
• Help you set up a workplace pension scheme if you employ people

CIS Accounting

The new SDC rules put stricter controls on CIS subcontractors’ employment status. Each month the contractor must verify the status of subcontractors working for him or her; if the subcontractor is deemed an employee, then the individual must be put through the firm’s PAYE system. Negligence in application of this rule can mean a fine of up to £3,000 for each individual as well as a twelve-month suspension of your “gross payments status”. The same goes for expenses.

 As you know, being able to receive personal remuneration without tax and NI deducted at source is essential for cash flow in the construction industry, so failure to comply with the new requirements for subcontractors could seriously put that at risk, and could result in your business suffering. A number of stricter compliance requirements now apply, which make errors, even one error, likely to affect your “Gross payments status” with immediate affect. This is so if you are:

•  More than 14 days late paying what you owe on PAYE/CIS deductions
• Fail to submit your self assessment tax return by 31 January
• More than 28 days late paying any tax you owe under self assessment
• More than 28 days late submitting subcontractor returns

Unlike any other accountant in the UK, Target Accounting provides another unique service to CIS contractors. Our cloud-based, fully integrated bookkeeping and accounting software, Nomi, which all our clients receive free as part of our services, has integrated modules designed specifically for CIS contractors and subcontractors, and is able to generate contractor statements.

CIS modules are integrated with payroll and self-assessment and accounts-production modules. All modules generate powerful reporting, such as VAT comparison, management, balance sheet, trial balance, profit and loss, departmental, detailed audit trail, detailed ledger and transactional reports.

Thus, while new compliancy and accounting rules are going to impact on many construction companies, contractors, and subcontractors, Target Accounting finds ways to make compliance easier and profits more attainable.

Of course, we can also help you with new legislation that affects tax liability for property on balance sheets, and all the other legislation that has been applied to “simplify” and make more “transparent” businesses transactions and tax status within the construction industry.