Processing payroll for employees in a timely and accurate manner is essential to running a business, so the payroll accounting can calculate payroll salaries and wages, bonuses and commissions, determine the correct individual deductions and withholding taxing, and file tax reports and payments with HMRC. CIS
CIS Payroll relates specifically to the construction industry, it outlines terms and regulates the way a sub-contractor is paid.
A construction company wanting to take on a sub-contractor must follow strict guidelines:
- You must first register your company with HMRC as a CIS Contractor.
- You must check the sub-contractor is infact a sub-contractor and not regarding by HMRC as an employee, this check has to be done with HMRC.
- You need to verify with HMRC how much tax you need to deduct from the sub-contractor, 20% if the sub-contractor is registered, 30% if not.
Another consideration you need to make is weather the work your sub-contractor is carrying out actually falls within the CIS.
Taxes deducted from the sub-contractor is paid across to the HMRC monthly and also CIS tax returns need to be submitted to HMRC on a monthly bases, which shows the amount you pay to the sub-contractor and how much tax is deducted.
The deadlines for submitting these are tight and penalties for late submissions are high.
Budget Tax 2013 Changes.
The launch of RTI, RTI or Real Time Information is a new way of reporting information to HMRC about PAYE, in the past employers have to reported annually, but now employers are going to have to report every time they pay an employee, weather that's a directory employee, whoever.
This is going to have to be done electronically, HMRC have stated that very few exceptions will be made where this can be done on paper. So for most employers this leaves three options for to be compliant with RTI:
- You will either have to use the HMRC's basic PAYE software, which is free but limited to 9 employees.
- You can buy commercial software
- Or you can engage a payroll agent or an accountant.
HMRC have stated that there will be penalties for late submission, something you have to be careful off, it doesn't change the way you pay employees only a change to the way you report information.
This is a big change to PAYE, the biggest since online filing was introduce a few years ago, you need to use an experience accounting firm.
After April 2014 new government legislation in relation to false self-employment will come into force, this means if you are currently paid through CIS but there are elements of self-employment in your work then you could be at risk of fines or penalties by HMRC.
The solution to this is the new Umbrella payroll service. If you work an Umbrella Payroll you will be engaged under a contract of employment and we will work under a business to business contract with the agency. The contract rate will be payable to Ontime Payroll and we will deduct our margin from it and will fulfil our legal obligations by making payment to HMRC for Employer's National Insurance. The balance is your salary on which you will pay income tax and employee's national insurance contributions.