CIS payments - ltd company or self employed

[Alan @ BroomeAffinity]

Short note: my partner works for a construction firm, where some of the CIS subcontractors have 20% deducted by the firm, and some do not. I don't know the details but this does suggest some more research needed if you care about the CIS option.

To work within the "Construction Industry" as defined by HMRC a business (ltd, sole, partnership, llp etc) needs to register as a subcontractor. When this is done then payment is made net of 20% tax. You can apply to be paid gross but you have to have turnover above a certain level and have squeaky clean tax history in both compliance and payment.

[expat]

Short note: my partner works for a construction firm, where some of the CIS subcontractors have 20% deducted by the firm, and some do not. I don't know the details but this does suggest some more research needed if you care about the CIS option.

[Alan @ BroomeAffinity]

Chris you were obviously submitting your post when I was writing mine. Essentially, yes your understanding is correct.

[Alan @ BroomeAffinity]

Whether you are CIS or non-CIS, the same fundamentals apply: IE, generally speaking you are better operating a Ltd Co. The tax is deducted by the client (or agency) at 20% and the net is paid to the limited company. You then pay our your salary / divis / expenses as normall and at the end of the year the Ltd Co receives a tax repayment from which an extra dividend or bonus can be paid.

[chrisl]

I thought that all workers coming under CIS had all deductions made at source i.e. by the customer, rather than letting you yourself or your accountant do it. This is to try to eradicate smaller businesses "forgetting" to make the correct payments to HMRC.

So probabaly self employed.

Yes i agree but my thinking is that if a limited company is used, working outside of IR35 is still an option giving a better final take home pay. Although it seems this option is long winded as the CIS deductions have to be claimed back at the end of the tax year through the P35. Therefore, CIS and corporaiton tax would have been paid, meaning a huge amount of tax in one go, although most of the CIS you will eventually get repaid. It just seems a bit long winded but is it worth the rewards in a higher take home pay?

Whereas, self employed seems an easier option but works out with worse take home pay if profits are getting taxed at 40% once the HRT band is passed.

If this is not right then let me know.

[Svalbaard]

I thought that all workers coming under CIS had all deductions made at source i.e. by the customer, rather than letting you yourself or your accountant do it. This is to try to eradicate smaller businesses "forgetting" to make the correct payments to HMRC.

So probabaly self employed.

[chrisl]

A quick question. Basically, as a contractor under CIS, which way is best to deal payments, using a limited company or being self employed.

What are the pros and cons to both options please???