Affected by CIS IR35 Rule

CIS Payroll IR35

What does the term CIS mean?

‘Construction Industry Scheme’.

HMRC Rules IR35 for the construction industry, how will this affect me as a CIS contractor?

Payments made by contractors to subcontractors for construction work.

If you are a sole trader or operate through a limited liability company, working in the construction business, you may need to register with HMRC under CIS. The Scheme applies to contractors, subcontractors and any organisations that spend a lot of money on construction, even if construction is not their main industry. It covers groups such as builders, gang masters, foremen, property developers, labour agencies and staff bureaus.

New IR35 Rule, will this affect me as a CIS Contractor?

The new IR35 rules affect the Construction Industry Scheme(CIS) at the government department/public sector. With the new public sector IR35 rules, the CIS tax regime does not apply. IR35 has ended the construction Industry Scheme tax regime for CIS contractor working with the public sector. Gross Income received from sole trader register with HMRC and director of limited company working under the Construction Industry Scheme in the public sector will be subject to income tax and national insurance.

YES, We can help

Senigpay ltd (Umbrella and payroll services) is registered for gross pay test. CIS workers gross payments can be made to us. contractors will not need to worry about 20% CIS deduction, Deductions to HMRC through income tax and National insurance will be calculated and filed and paid to HMRC using our payroll software, net pay will be paid into your contractor bank account.

Employee will be able to claim income tax relief on the following expenses charity donation, training and subscription through self-assessment return at the end of the tax year. Also claim income tax and national insurance relief on mileage expenses from work place to temporary place of work, but will not be able to claim relief on mileage expenses from home to work.

Do you think we can help? Please visit our website, fill in the contact form and we will get back to you immediately. Or call us on 01279772966

IR35 expenses In the public sector from 06 April .

From 06 April, 2017 IR35 status for people working in the public sector will be determined by clients not agency, all contractor working in the public sector will be caught by IR35, the government will also be scrapping the five percent intermediary expenses and other expenses stated above.

• Pension payment
• Business travel (incurred during business duties)
• Subsistence (accommodation, meal when away from home
• Professional Indemnity Cover
• Payroll / Contractor Umbrella Services

Expenses Contractor Can Claim If Caught Under IR35

Contractor working for public sector will be automatically caught under IR35, contractor income will be subject to income tax and National Insurance, will not be able to claim five percent intermediary expenses and other expenses stated below

• Pension payment
• Business travel
• Subsistence
• Professional Indemnity Cover

If the Contractor operated through an Umbrella Company, not under SDC (Supervision Direction and Control), the contractor will be able to claim business mileage from Work to temporary place of work/clients site on income tax and national insurance contribution.

Contractor will also be able to claim travel from home to work, business travel, subsistence, professional Indemnity cover through P87 return/self-assessment tax return at end of the tax year on income tax not national insurance contribution.

If contractor is under SDC (Supervision Direction and Control), also a multi-site worker, the contractor can claim business mileage from Work to temporary place of work/clients site on income tax and national Contribution.

Contractor under SDC (Supervision Direction and Control) will also be able to claim subscription, training related to the contractor job through P87 return/self-assessment tax return at end of the tax year on income tax not national insurance contribution.

For more help contact our Contractor Umbrella who specialise in IR35 payroll on 01279 772966 or e-mail [email protected]

Senigpay Expenses Policy And What You Are Able To Claim For

Contractors working through an umbrella company can claim expenses through three ways. Business mileage, reimbursed expenses or by claiming allowable expenses through end of the year tax return. Below, we aim to spell everything out in general. But please note that the expenses policy will be subject to assessment of the individual contractor’s status.

Business mileage

HMRC’s new regulations state that a contractor working through an umbrella company cannot claim relief on tax and National Insurance on travel using train or bus from home to their place of work. They are only allowed to claim business mileage relief on tax and National Insurance from work to temporary place of work. To determine if the mileage expenses can be claimed the following would need to be satisfied:

Details of the journey made
Why the journey had to be made
What they were doing
Who they were doing it for

Claiming the business mileage will only be allowed if the contractor is NOT caught by SDC (Supervision, Direction and Control).

What is the meaning of SDC?

Supervision
Supervision is referring to someone overseeing workers to ensure the job is being done properly or to a specific standard. The process of a person helping the workers to develop their skills and knowledge is defined as supervision.

Direction
Direction means someone making workers carry out their work in a certain way by providing instructions, guidance or advice.

Control
Control applies to someone dictating what workers do in the context of their job. This includes someone having the power to move the worker from job to another.

If the contractor does not fall under SDC, then he or she will be able to claim mileage deduction relief.

Multi-site workers

If a contractor is a multi-site worker, they will also be able to claim business mileage relief on income tax and National Insurance, even if he or she is caught by SDC.

A good example of a multi-site worker is a care worker who lives in Enfield town and works for Care Agency Ltd in Harlow. The care worker intends to visit a patient’s house in Bishop’s Stortford and then another patient’s house in Waltham Abbey later in the day.

The care worker can claim relief on tax and National Insurance for mileage on the journey from Care Agency Ltd in Harlow to the patient’s house in Bishop’s Stortford, and also mileage relief on the journey from Bishop’s Stortford to Waltham Abbey.

However, the care worker will not be able to claim mileage relief on the journey from home (Enfield town) to work (Care Agency Ltd in Harlow). Nor the journey from home to the first patient’s house in Bishop’s Stortford, if the worker went there directly. Neither can the care worker claim for the final journey from the last patient’s house in Waltham Abbey back home. Basically, if the journey to a workplace is from or back to home, then it is not allowed. However, if the journey from last place of work to home is not a regular commute, then mileage may be allowed.

Reimbursed year end expenses through self-assessment tax return.

If the contractor is not caught by SDC and does not fall under the 24 months’ rule, they will be classified as a temporary worker. So, apart from the mileage expense, the contractor will be able to claim allowable expenses such as travel to work and other allowable expenses which we will be able to advise to each worker in an individual basis. We’ll cover this next…

Expenses – What Can You Claim For?

A lot of contractors think the rules for expenses when working through an Umbrella company on a PAYE basis are fairly cut and dried: no travel and subsistence expenses before tax.

The above is true – HMRC considers that you would have had to travel to your place of work in any normal employment and eat anyway, whatever you are doing. But it begs the question: what expenses can you claim for?

If the nature of your work is such that you are under supervision, direction and control, then there may be few expenses allowable to be claimed during your self-assessment. But all claims for expenses have to be ‘wholly, exclusively and necessarily’ in the course of your business.

This means reimbursement for items that you paid for purely because of your work. Not a personal expense that anyone would have during a normal working day (like a coffee and cake). This narrows it down to the following:

Travel to work temporarily at a location away from the usual workplace
Please note – this travel needs to be to a genuine temporary place of work, not a workplace where the contractee is routinely carrying out their job. If using your own transport, this is referred to as ‘Business Mileage’. Up to the first 10,000 miles of travel, drivers of cars and vans can claim 45p per mile, motorbikes 24p per mile, and bicycle riders 20p per mile. After 10,000 miles, the rate for cars and vans drops to 25p per mile, the rest stay the same. If using public transport (train, bus, coach, boat, plane) or taxi to a location away from your primary work location, then you can claim the cost of the fares – be sure to keep all tickets, etc.
Accommodation, tolls, parking, congestion charge
Only in the course of working at a temporary location or a Business Mileage trip as outlined above. In this case, you can claim for your accommodation, highway tolls, parking and congestion charges. But again, this has to be in the course of your business. If you add an extra day that you can’t account for being part of your job (for sightseeing, etc), then this is not allowed.
Items purchased to fulfil your work
These would be the tools of your trade, or something else you have to buy to get the job done. Hammer, memory stick, goggles, antiseptic wipes, stapler, glue gun, fuse wire, etc.
Phone calls made in the course of work on personal devices
You will need to provide copies of the itemised bills as evidence. But if you had to make calls on your own phone for purely business purposes then you should be able to claim this back.
Health checks, Training and professional development
Only where directly related to your work. If you had to personally pay out for it when a client or the regulations required you to have an eye test or physical check, or to take a training course, then be sure to claim it back!

Remember, all expenses must be ‘wholly, exclusively and necessarily’ in the course of your business.

In the end, you should be able to claim chargeable, allowable expenses that are beyond the usual travel and subsistence. As long as they are simply reimbursement of actual expenditure incurred, then those expenses can be paid to you net of income tax and National Insurance contributions.

So, how do you make sure your expenses claims are successful? Here are a few simple guidelines:

Make sure that you have something in writing from the client relating to the expenditure. This could be an email or letter asking you to work in a different location, or a request to buy something that they’ll reimburse you for later.
Make sure you keep a log of all business expenditure, and make a note of what activity it related to. Give it a number that you can also write on the receipt. It’s best to do this as soon as possible after you paid out.
Keep all receipts, tickets, itemised bills, etc, and note the numbers you wrote in the log on them for reference.
If you had to drive somewhere away from the usual workplace for business, keep a detailed mileage log. Note the postcodes of the places you had to drive from/to.
Be honest. Make sure your expenses fall into the ‘wholly, exclusively and necessarily’ bracket. Don’t try to pad them out or over-claim; HMRC will be looking out.
If in doubt, take advice – an accountant is your best resource.

Do you need an accountancy service?

Our parent company, Seniguk Consulting Ltd, is an expert accountant for contractors, self-employed workers, agencies and SMEs. We’d be happy to work with you on your accounts, and it could make sense to have all your paperwork under one roof.

Please click through to senigukconsulting.co.uk to learn more about us and get in touch for an informal chat.

What Happens To Public Sector Workers From April 6th?

We’re already starting to see an exodus of key contractor workers from Public Sector positions, especially in IT, since HMRC announced changes to the IR35 legislation. There could be a crisis developing that would affect some important projects. What’s really happening?

Basically, this all started because of the growing number of workers employed by Public Sector companies ‘off-payroll’, and the consequential reduction in tax revenue to Her Majesty’s Treasury.

A number of organisations have been employing contractors off the payroll (either on the contractor’s own instigation, or at the employer’s request) for years. Contractors then supply their services through their own Limited company or Personal Service company. The contractor/supplier simply invoices for their services and the company pays the billed amount.

This took the obligation to pay employer’s National Insurance and process the tax on wages away from the employer. It put the onus on the contractor (working through his own company) to remit to HMRC the tax and NI due.

However, since the contractor is an owner/employee of their own Limited company, they need not pay themselves a set salary. They can be paid a smaller wage with other payments in dividends, which the government taxes differently. Thus, for every worker taken off a company’s or agency’s PAYE scheme, the Treasury receives less tax.

The Government needs the money, and HMRC is tightening the rules

HMRC originally introduced the IR35 legislation in April 2000. The government created it out of a need to determine whether a contractor is in fact properly self-employed or should be technically an employee, and therefore on-payroll. A lot of the reasoning behind this is down to the contractor’s working routine. If it were not for their intermediary company, would they in effect be an employee of the client? Public sector companies are often easier for the government to audit than private ones.

Various legal cases have tested HMRC’s definitions and determinations of what constitutes self-employment and a proper service company over the years. However, bigger changes and refinement of the rules have recently taken place. These affect many contractors working for Public sector and Private companies.

In April 2016, HMRC brought in tougher rules regarding contractor’s expenses claims, as umbrella companies were repeatedly using large expenses to offset against tax liability. In particular, this related to travel and subsistence expenses for those working under supervision, direction and control.

HMRC ruled that contractors could no longer claim travel expenses from home to their primary place of work, as all normal employees have to travel to work as a matter of course. Neither could they claim for food and drink while at work, as they have to eat anyway whatever they’re doing. And again, a normal employee doesn’t get a free lunch.

More changes on the way

However, HMRC announced even further rules late last year for introduction this April. They state that anyone working in a situation that is equivalent to full-time permanent employment must pay national insurance on the payments they receive. By implication, it also means the client/employer should pay employer’s national insurance as well. This is a tougher measure against tax avoidance by off-payroll full-time regular contractors running payments for their work through their own personal limited companies, when they could technically be seen to be normal employees.

This means that companies should technically bring many contract workers into their PAYE. Or they must employ contractors through an umbrella company, who pay the contractor on a PAYE basis.

This puts the normal contractor in a difficult position. Some will feel that they should stick with limited company status and find other work on a freelance basis. Others will be in a position where they are in ongoing employment for a company, or through a particular agency. Leaving that position may not be possible on a financial or career basis.

If the latter, then the best option is to work with an umbrella company. This way, the contractor’s employment can continue smoothly, and they also remain compliant with HMRC. They’ll be able to relax while the umbrella takes care of their contracting, tax and National Insurance payments for them.

If you haven’t already joined Senigpay, then now is the time to do so. Give one of our friendly team a call, and we’ll be able to talk through the best options for you.