David Brindley and Jas Jhooty set out some of the common pitfalls in the Construction Industry Scheme (CIS), including examples of where things can go wrong.
Throughout our careers in tax we have both come across clients making errors in the CIS regime. The most common cases are usually due to ignorance or naivety rather than any deliberate intent.
The nuances of the legislation make this area complex to navigate and, as such, if any construction activity is being conducted (however minor or for whatever reason) it is important to ensure that you do not unwittingly fall into the scheme.
From a net financial position, failure to apply CIS properly can result in more dire consequences than most other tax regimes, should there be a failure to apply it properly. This is due to the fact that it can result in a consequence where the contractor will have paid the tax-inclusive amount to the sub-contractor (which they may not be able to get back) and then have to also pay the tax for the sub-contractor, resulting in a double charge for the contractor.
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