It is important to remember to register for CIS as a subcontractor and as a contractor as you can face heavy financial penalties.
Failure to register as a subcontractor
If you do not register under CIS, you will have tax deducted from payments made by your contractor and will be taxed at a higher rate. You will also still need to complete tax returns, and if you do not do this you will receive penalties and estimated tax bills. If you don’t register and don’t complete tax returns, the tax deducted from payments made to you cannot be credited against your final tax liabilities or estimated bills, and you could end up being taxed twice.
Estimated bills, called ‘determinations’ can be enforced by HMRC, even if you have already paid tax. To get credit for any tax deducted at source you will need to make a claim by filling in a tax return.
To claim credit for tax deducted your tax returns need to be filed within 3 years from the 31st January filing date for that tax year. If this is not done then it may not be possible to change your estimated tax demand. You will lose out on refunds or even face bankruptcy.
If you have not registered for self-assessment or CIS then you are breaking the law. You will not be paying the correct amount of tax, and may face significant tax bills and penalties in the future.
If you have registered for self-assessment and for CIS, and you are still having 30% tax deducted from your income, you should contact HMRC at once to sort out the mistake.
Failure to register as a contractor
If you fail to register as a contractor for CIS you could face large penalties. This includes a fine for not keeping CIS records and a £100 per month penalty per missed CIS return.
Failing to register for a number of years could lead to penalties in the tens of thousands of pounds. This can happen even when all the workers who are registered as self-employed have paid all due tax on their income.
