I have the opportunity to become a subcontractor under CIS 4. I know that?

Question

I know that by doing this I would be paying 18% tax (with no NI). But is this true? There must some pitfalls, otherwise everyone would become a subcontractor. Thanks

Answer 1

some people prefer it, you don't get holidaypay or sick pay or redundancy

Answer 2

I do not understand why you think this is so marvellous. The Construction Industry Scheme applies to people in the construction industry (obviously). The 18% deduction is only a way of forcing a subcontractor to effectively make an advance payment against his tax liability.

At the end of the tax year the tax liability is calculated in the usual way and this is no different from taxpayers not working in construction. The only difference is that those in the construction industry have already made some payments on account by having 18% deducted at source. If the actual tax liability is more than the amount deducted then the balance will be payable as usual. Conversely if the tax deducted at source is greater than the actual liability then a repayment will be made.

Answer 3

you will have to pay weekly or four weekly NI contributions which is about £2.10 a week (not sure of 06/07 figs) You will also have to pay class 4 NI contributions on your profits over the amount of £5135 at a rate of 8%

plus you will have to complete a tax return and keep accounting records of you expenses and keep your CIS slips and receipts safe. You will need to register as self employed with the tax man and you have 3 months from the end of the month you started in or else you will face a £100 fine. You will most likely need and accountant which could cost anywhere from £200- 350 plus vat to do you accounts and tax return depending on what part of the country you are from.

One thing you need to be careful of is the status of your self employment. if you are using the contractors tools and only working for one contractor, then you could be deemed employed instead of self employed.

one main pitfall is that is you take holiday, you wont be paid.

Answer 4

Yes. Listen, Bush got involved in Iraq when he shouldn't have, but he kept it under control when he was president. Obama is taking the actions that Bush should have a long time ago by going after al Qaeda. (I think that's spelled right.) The problem is, he's abandoning Iraq to do this and with the things as there in Iraq, he simply cannot do that. He's acting like a complete fool.

Answer 5

yes it's true but you will still need to purchase your own weekly N.I. stamp ( the full stamp as the cheaper one does not entitle you to stat. sick pay ) you must also remember that you don't get holiday pay or stat days off with pay, so you see, it's not so green on this side of the fence.

Answer 6

talk to a tax proffessional or a contracting company like http://www.psccs.com/