The Construction Industry Scheme And The UK Tax Authorities
The Contractor’s Accounting Law was introduced in the UK to counter perceived abuse of tax in the construction industry in recent years. In the UK, it is widely accepted that the construction industry is one of the more profitable sectors concerning the provision of assets for private equity. Many large UK corporations (e.g. Birchwood Properties) have made large sums of money in construction and they pay a substantial amount of corporation tax on these profits. However, there is also a perception that these same companies may be avoiding paying their obligations to the UK tax authorities. The tax office has the power to fine contractors or small companies that do not follow the correct procedures in terms of submitting tax returns or paying the appropriate tax.
The UK Company Tax Scheme
The Contractor’s Accounting Law was introduced to address these concerns. First, the UK company must submit a declaration that it will make all tax payments that it is required to pay under the UK company tax scheme. Next, the company must submit an annual return to the HMRC stating the amount of its gross and taxable income and pay the appropriate rates of corporation tax. An additional fee is charged at the end of the year at the rate of one percent of the gross amount and another vat reverse charge. Many articles explain the contents of this article tagline.
The Aim Of Contractor’s Accounting Law
With this system, the contractor or subcontractor is liable only to the tax applicable under the contract of the UK company. The Contractor’s Accounting Law aims to discourage corporate avoidance of UK company tax. However, some contractors may use this scheme to reduce their liability to the subcontractor. This is because the tax amount payable to the subcontractor is lower than what they might otherwise have been liable to pay to the company under the construction industry scheme.
Tax Contributions
Under the Contractor’s Accounting Law, the self-employed can avail themselves of special relief options. The best option is the so-called in-kind contribution provision. Under this scheme, the contractors can make tax contributions to the UK Company tax, and the payment is also made to the UK tax authorities on behalf of the contractors. It is important to understand that such contributions need not be refundable. In case the company decides not to continue with a project, the contractors pay nothing for that.
CIS Schemes
Other special provisions apply to the self-employed working for others. For example, the subcontractor is entitled to make contributions to the CIS schemes. In addition, the contractor and subcontractor need to take a deduction for expenses that relate to travel expenses and meals that are taken abroad. These are just a few of the special provisions that apply to the scheme of Contractors Accountancy.
Legal Rights And Privileges
Another important feature of the Contractor’s Accountancy scheme of the UK is that it entitles the subcontractors to work within their legal framework. In other words, they are entitled to legal rights and privileges. Apart from that, the construction industry in the UK has some regulations and rules that need to be followed. These rules are referred to as the construction industry bills.
Construction Bill
All the regulations and the rules can be applied at the time of applying for the construction project by the self-employed and the Sole Proprietors. The contractor must make sure that he has understood all about the construction bill and his obligations when it comes to the payment of taxes. The Sole Proprietors and the self-employed that are not subject to any kind of work contract must also ensure that they have read the construction bill thoroughly before they commence any work.
The Scope To Engage In Complex Projects
The construction sector has a unique set of benefits that the self-employed and the sole traders cannot get. It offers them the scope to engage in complex projects that involve a lot of costs. However, they are bound to follow all the norms and the rules provided under the law of the UK. This is how the concept of the Limited liability partnership works. The construction industry is one such sector that has benefitted from the concept of the CIS.
