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Payroll is becoming increasingly more complicated as the Inland Revenue become centralised and pass more & more of the administrative burden onto businesses.
This can been seen by the introduction of Family Tax Credit & the collection of Student Loans and Minimum wage etc in recent years.
The Inland Revenue are putting firms under more pressure to ensure that all payroll aspects are completed accurately within strict timescales. The smallest error is met with stiff fines and penalties.
We can provide a fully computerised payroll bureau providing clients with a painless and yet cost effective solution to the payroll nightmare.
Weekly or monthly payrolls are undertaken, covering all aspects of running a company payroll including: -
- Sending notifications of new starters on the appropriate form by fax or email.
- Fax or e-mail timesheets on an Excel spreadsheet
- Payments by BACS, cheque, or cash.
- Cash breakdown
- Journal entries to enter the payroll into the accounting records.
- Job Costing Breakdown
- Year End Returns P60s etc Including stationary
- Dealing with your construction industry scheme (see below)
Construction Industry Scheme
The scheme IR35
The Revenue has introduced a new scheme to try and ensure that tax was correctly paid on payments made within the construction industry. Every company or self-employed person making or receiving payments must be registered to the scheme. |
For each or every group of payments made through a month a voucher has to be completed that states the gross payment, materials value if applicable and tax deducted if applicable. The Inland Revenue, contractor and subcontractor each then have a copy. Any tax deducted is paid to the Revenue every month or quarter along with any PAYE tax and NI. |
At the end of the year all the vouchers are consolidated on a year end return. Any tax deducted from payments received is taken into account when calculating the total tax liability for the business. From April 2002 limited companies can set-off any tax deducted from payments against their PAYE tax and NI liability. |
Registration
To work in the construction industry you have to be registered as a contractor, subcontractor or both. The application form is available from your local Revenue office and is a two-stage process. |
An appointment has to be made with your local Revenue office for the person who will be registered. For a limited company it is normally one of the directors although the company secretary makes the application, for partnerships usually all the partners are registered. You will need to take with you some form of identification and two passport size photo's. The purpose of this meeting is to certify your identity and issue you with the second stage forms. |
The second form is the application proper and caters for both new and existing registrations (to alter their registration type) and requires a fairly brief description of your business, personal details, turnover etc The type of registration you receive depends upon the information you supply here. |
Certificates and cards
There are two types of registration possible, gross payment and tax paid. The vast majority of new applications will receive a tax paid registration that will result in a registration card (CIS4). Where the business turnover reaches a certain amount and your Inland Revenue history is acceptable a gross payment certificate (CIS5 or CIS6) may be issued. The certificates are in the form of a credit card and bear your name, trading name, company name, photograph, and NI number, registration number and expiry date. To receive payments you must show this card to other registered businesses, once seen it need not be presented again until it expires where upon the new card will need to be presented. |
CIS4 Registration card . This has to be renewed every 12 months and usually after the first six months of issue. Holders of temporary cards, who could not renew them, may now renew them for up to 12 months (and up to 36 months in exceptional circumstances). All cardholders receive payments 'under deduction’; this means that tax is deducted from your payment before you receive it. |
CIS6 Gross Payment Certificate . We can ignore CIS5 certificates as they are only issued to large companies with special payment requirements. By having a CIS6 certificate you are instructing your contractors to pay you the full amount of your invoice without any tax deduction. It does not matter what type of certificate they have. To retain this type of certificate you must continue to have a good payment record with the Revenue and satisfy their turnover requirements. |
Vouchers
All payments received, as opposed to invoiced, between the 6th of the month and the 5th of the following month must be recorded, either as a total of all payments or separately, on a self carbonating three part voucher. The Revenue has the top copy and your contractor/subcontractor is also sent a copy, you also retain a copy. Vouchers spoilt, lost or destroyed have to be immediately reported to the Revenue. |
CIS25 vouchers are for use with CIS4 Registration Card holders and record the amount of tax that has been deducted. The contractor completes the details of the voucher, as it is they that are making the deduction. Tax can only be taken off the proportion of the invoice that refers, in general, to labour. All material costs, equipment hire charges specific to the job and VAT, but not fuel for machinery or consumables, are taken off the invoice total before the tax is deducted. The details that need to be recorded on the voucher are the subcontractors name and address, their card and NI number, month and year of payment, invoice total less VAT, material cost less VAT, the total from which tax is to be deducted and the actual deduction made. |
CIS24 vouchers are for use with CIS6 Certificate holders and record the gross payment made. The subcontractor completes this voucher. There are fewer details to be entered on this voucher, as it is purely a statement of receipt of payment. Details required are the contractor’s name and certificate number, the month and year of the payment and the amount received less VAT. |
Vouchers are only issued after a payment has been received and only refer to construction industry related items. If the invoice that has just been paid has a mixed content then that which does not refer to construction is totally ignored. |
Payment of tax
Tax deducted from payments made to cardholders must be paid to the Revenue by the 19th of the month/quarter for which the payment has been recorded on the voucher. Payment is made in the same way as PAYE tax and NI if you have employees. If you have no employee PAYE scheme registered you will be sent a yellow payment book. |
If your total monthly liability to the Revenue is less than £1,500 you may elect to pay quarterly (you do not have to specially advise them). All the tax deducted must be paid on time; any late payments will be recorded and will go against any application in the future for a gross payment certificate. |
With effect from April 2002 limited companies may set-off any tax deducted from payments against any PAYE tax and NI liability. So for instance, if your PAYE & NI liability for employees totalled £1000 and you had already suffered a deduction of £300 CIS tax then you need only pay £700. This has been introduced to aid smaller businesses cash flow situations. Any CIS deductions you are unable to set-off in one month or quarter can be carried over to the next. |
Year-end
If you have a PAYE scheme the amount of tax that has been deducted from subcontractors has to be entered on the P35 end of year summary. There is a special CIS end of year summary form, and associated paperwork, that has to be completed to declare the value of payments made and the amount of tax deducted. |
The forms are fairly straightforward to complete, the hard thing is the record keeping throughout the year. There are two types of form to fill in, on the first type of form all vouchers for payments to each subcontractor must be entered as a total for each subcontractor, each form must only bear payments made under the same type of certificate. The totals for each type of certificate are transferred to the main CIS36 summary form. |
If you have a PAYE P35 form to complete the tax deducted amount is transferred to it at this point and the form is complete, otherwise you will have to enter the amount of tax deducted that you have paid to the Revenue throughout the year and calculate the amount that is left to pay. This must be paid by 19th April. |
Why not contact us now for help with your payroll.
The information within this site is intended as a guide only. Seek professional advice before deciding on a course of action. We will not be held liable for any decisions made or actions taken based upon information contained within this site. |
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Accountancy 
