Are you a contractor? If you work for someone else, it is important to know whether you are working for that person in an employed capacity or in a self-employed capacity as an independent contractor.
Your employment status will determine the charge to tax on income from your employment or self-employment. It will also determine the class of NICs, which are to be paid.
Umbrella Companies employ you for tax purposes and complete central returns for all their contractors. It's less hassle and more flexible for you but take home pay is typically less than that the limited company option.
The best option for you depends on your plans, 'one off' contract or 'contractor for life'? [Read More...]
CIS is an acronym for 'Construction Indstry Scheme'.
If you work in the construction industry and are a contractor (or subcontractor) you have to follow certain specific tax rules. Who says so? HMRC say so and in April 2007 these rules were completely overhauled. If you don't like it you should take it up with your MP. Meanwhile...
The good news is that there are many companies around who will look after all your CIS paperwork for you.
As a contractor you need to confirm the tax status of all your subcontractors. You do this with HMRC. Don't make any payments to your subcontractors until you have confirmed their tax status.
This process is known as 'verification'. When you have verified your subcontractors HMRC will tell you how they should be paid, which will be one of two ways, either:
The Contractor also has to send HMRC a record of this of this (called a 'return') on a monthly basis.
A subcontractor has to register himself or herself with HMRC. If you don't do this, the amount of money you get paid will drop. This is because higher-rate tax deductions will automatically be taken from your payments.
HMRC will let you know what tax deductions apply to your specific situation. The standard tax rate is 20%, and the higher rate 30%. You might even qualify to receive your money gross - that is with no tax deductions. For this, you must first pass HMRC's tests covering:
A subcontractor must also be registered as self employed. This means taking responsibility for tax self-assessments, business expenses and NIC payments over and above CIS registration.
Do you know if you're covered by CIS? You should check whether the work you are doing is covered by CIS. Don't forget that if any part of your contract is covered by the scheme, then all payments made by contractors to subcontractors for that work must be made through the CIS scheme.
There are other activities covered by CIS while some activities are also specifically excluded. There are more detailed rules explaining what comes under the CIS scheme which can be found at HMRC's website.
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It's the basics... Compliance with Tax, VAT, PAYE and fiscal arrangements is mandatory for contractors regardless of whether you use an umbrella company or your own limited company.
Incredible then that there are still rogue umbrella companies and limited company accountants who expose their contractors to fraud. Umbrella Compare provides THE solution, we thoroughly vet all umbrella companies and limited company accountants that we list [Read more...].
Umbrella Compare provides a holistic overview of contracting with the aim of helping new and old contractors find the right payroll solutions. Contracting should be about focusing on the contract, not payroll, accounting, HMRC and bureaucracy.