X

Sign Up

or

By signing up I agree to Property Tribes Terms and Conditions


Already a PT member? Log In

Sign Up

Sign Up With Facebook, Twitter, or Google

or


By signing up, I agree to Property Tribes Terms and Conditions


Already a PT member? Log In

Log In

or


Don't have an account? Sign Up

Forgot Password

To reset your password just enter the email address you registered with and we'll send you a link to access a new password.


Already a PT member? Log In

Don't have an account? Sign Up

  • Refurbish/Develop

    Construction Industry Scheme

    I was thinking of having a go at a (small) flip where i would do the bulk of the work and then get in the trades if and as needed. I recently came across the construction industry scheme (CIS) (cant post the link but easy to find via online search) and on first read it sounds like my flip activity would be within scope, even though it is relatively small.  It seems quite onerous and, as i understand, requires me to check whether the sub contractors are registered with the scheme and then withhold a proportion of the payments (20%/30% depending on whether they are registered under the scheme) and pay this to HMRC.  I've never come across this in my dealings with the trades (maybe because I've never done a refurb/develop flip) but i can imagine that they wouldnt be too happy with me and might prefer to work with an owner occupier doing a bit of work on their property or a BTL owner doing a bit of refurb prior to letting.

    Have i misread/misunderstood the rules? Do other refurb/developer flippers do this? Are there any ways to reduce the burden here?

    0
    0

    I seem to remember the CIS scheme is to be used to enable contractors to employ sub-contractors on a casual basis (short term) by deducting their tax (or not ) from their payments depending on the status of sub-contractor. You would have to be registered as a contractor within that scheme which I guess you are not unless you have been trading for a while. I don't think/know of any advantages to yourself even if you could join. Its an onerous scheme with monthly digital returns & payments.

    0
    0

    Thanks, Hollywood.

    I suppose there is a question mark in my mind over whether my activity is classified as a 'business', but if it is (and i think it is even though it is going to be small) then, as i understand the rules, I am required to register as a contractor.  There doesn't appear to be an option here. Have i missed something?

    0
    0

    Sorry but I agree with you. This is a business activity. You will be a  contractor unless your third party trades will cost less than £1000 (labour element only)

    You will need to register for CIS and then deduct tax (unless the specific sub-contractors are registered for gross payment - its your responsibility to check and do this). This means that the contractors have had their self employed pay subject to PAYE and they will need to do a tax return to get it refunded (if a refund is due) - so doing the works just before 5 April means they are cashflowing the tax for less time.

    CIS applies where there are construction works so a sub-contractor doing garden maintenance would not be subject to CIS

    1
    0

    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022


    Thanks, Stuart.

    Is the £1,000 (de minimis) threshold per sub-contractor, per project or per annum?

    If I dont want the hassle of registering and doing all the admin, is the only way around this to get a contractor to do the refurb/development, or would this still be captured by the scheme as my activity is classified as a business?

    0
    0

    If an individual employes a contractor to carry out work for theml then it is nothing to do with cis you pay the contractor in full,  they sort out their own income tax, as most self employed do. Cis is for the construction industry sub contracting construction trades.

    0
    0

    But he is not an individual he is a developer so it is a business even if he trades on his own name

    0
    0

    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022

    Are you a contractor is the question here?

    It's a question of scale. The £1000 limit is for all labour. But if you are an investor then you can do much more (£1m on average over 3 years) but you imply you are a developer so I think you are caught.

    Appointing a contractor whilst you still qualify as a contractor will not avoid CIS admin (although you may not have to make any deductions). However if in doing so this changes your core business to property investment and not property development then you are out of the CIS regime.

    It is not that hard a scheme to administer, although usually it is outsourced to accountants.

    0
    0

    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022


    Are you a contractor is the question here?

    It's a question of scale. The £1000 limit is for all labour. But if you are an investor then you can do much more (£1m on average over 3 years) but you imply you are a developer so I think you are caught.

    Appointing a contractor whilst you still qualify as a contractor will not avoid CIS admin (although you may not have to make any deductions). However if in doing so this changes your core business to property investment and not property development then you are out of the CIS regime.

    It is not that hard a scheme to administer, although usually it is outsourced to accountants.

    1
    0

    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022


    If i understand correctly, it depends to some extent on whether my activity is investment or development (or some other activity).

    My intention was to buy a property (not one that i will be living in), put in new kitchen, bathroom, flooring, central heating if necessary, repaint etc etc and possibly do side / rear / loft extensions if appropriate (getting in the trades if and as necessary). Once complete, my intention would be to sell and then move onto the next one - if successful.  I have translated this to be development activity, which requires CIS registration etcetc as above.

    If, instead of selling the property, i mortgage it and let it out, i guess that my activity then becomes primarily investment activity and then higher threshold of £1m over 3 years comes into play, or is CIS not relevant at all for a property investment activity?

    0
    0