If you are unable to pay the Construction Industry Scheme (CIS) tax, it is important to take action as soon as possible to resolve the situation. One option is to negotiate a payment plan with HM Revenue and Customs – HMRC, who is responsible for collecting CIS tax.
This may involve spreading the debt over a longer period of time or making smaller, more manageable payments. It is important to communicate openly and honestly with HMRC about your financial situation and to provide any supporting documentation that may help your case, such as proof of income or expenses.
Another option is to seek advice from a professional, such as an accountant or financial advisor, who can help you understand your options and negotiate on your behalf with HMRC. They may be able to suggest alternative ways to manage your finances, such as applying for a loan or restructuring your business to reduce your tax liabilities.
It is also possible to dispute a CIS tax bill if you believe it is incorrect, but this can be a complicated process and it is recommended to seek professional advice in such cases. In extreme cases, if you are unable to resolve your CIS tax debt, you may face legal action, including enforcement proceedings or insolvency.
What is the Construction Industry Scheme?
The Construction Industry Scheme (CIS) is a set of regulations introduced by the UK government to ensure that contractors and subcontractors working in the construction industry pay the correct amount of tax and national insurance contributions. Under the CIS, contractors are required to deduct a percentage of the payments made to subcontractors for construction work and pay this amount directly to HMRC as tax on behalf of the subcontractor.
Subcontractors must register for CIS and provide their tax details to the contractor, who is responsible for verifying their status and making the appropriate deductions. The CIS helps to ensure that subcontractors pay the correct amount of tax and that they are not unfairly disadvantaged compared to employees. The scheme applies to all types of construction work, including building, engineering, and refurbishment projects.
What are your options if you fall into arrears with CIS payments?
If you fall into arrears with your Construction Industry Scheme (CIS) payments, it is important to take action promptly to resolve the situation. One option is to negotiate a payment plan with HM Revenue and Customs (HMRC), who is responsible for collecting CIS tax. This may involve spreading the debt over a longer period of time or making smaller, more manageable payments.
It is important to communicate openly and honestly with HMRC about your financial situation and provide any supporting documentation that may help your case. Another option is to seek advice from a professional, such as an accountant or financial advisor, who can help you understand your options and negotiate on your behalf with HMRC.
In extreme cases, if you are unable to resolve your CIS tax debt, you may face legal action, including enforcement proceedings or insolvency.
HMRC Time to Pay (TTP) arrangement
HMRC Time to Pay arrangement is a payment plan that allows individuals and businesses to resolve tax debts by spreading the payment over a longer period of time. This option is available to those who are unable to pay their tax bill in full by the due date and are facing financial difficulties. To apply for a TTP arrangement, you must contact HMRC and explain your financial situation, providing any supporting documentation that may help your case. HMRC will then consider your application and determine the terms of the TTP arrangement, which may include a payment schedule and any other conditions.
The TTP arrangement is a flexible solution that can help you to manage your tax debts and avoid enforcement proceedings or insolvency. However, it is important to note that interest and penalties may still apply, and it is crucial to keep up with the payments under the TTP arrangement to avoid further consequences.
Alternative funding
If you are unable to pay your Construction Industry Scheme (CIS) tax, there are alternative funding options that you can consider to resolve the situation. One option is to apply for a loan from a bank, building society, or other lending institution. This can provide a lump sum of funds that can be used to pay your CIS tax debt in full. Another option is to seek investment from friends, family, or private investors, although this may come with strings attached.
Additionally, you can consider restructuring your business to reduce your tax liabilities and increase cash flow. This may involve changes to your operations, marketing strategy, or pricing, for example. It is important to seek advice from a professional, such as an accountant or financial advisor, before making any significant changes to your business or taking on new debts. They can help you to understand your options and determine the best course of action for your situation.
Company Voluntary Arrangement (CVA)
A Company Voluntary Arrangement (CVA) is a legal agreement between a company and its creditors, including HMRC, that allows the company to repay its debts over a period of time. If you are in arrears with your Construction Industry Scheme (CIS) tax and facing financial difficulties, a CVA may be a suitable option for resolving the situation. Under a CVA, the company’s debts, including the CIS tax arrears, are consolidated and a payment plan is agreed upon with creditors.
This can provide a structured and manageable solution for repaying debts, allowing the company to continue trading while paying off its obligations.
However, it is important to note that a CVA can have a significant impact on the company’s reputation and credit rating, and it is a serious step that should only be taken after careful consideration and with the advice of a professional, such as an insolvency practitioner. In addition, a major con of a CVA requires the support of 75% of creditors, including HMRC, to be approved and implemented.
Licensed insolvency help when you can’t pay CIS tax
A licensed insolvency practitioner (IP) can provide help and advice when you are unable to pay your Construction Industry Scheme (CIS) tax. An IP can assist you in exploring your options and determining the best course of action for your situation. This may involve negotiating with HM Revenue and Customs (HMRC) to agree on a payment plan or resolving any disputes over the amount of tax owed. If your financial difficulties are more serious, the IP may suggest alternative solutions, such as a Company Voluntary Arrangement (CVA) or entering into a formal insolvency procedure, such as administration or liquidation.
An IP can guide you through the process, ensuring that your rights and obligations are protected, and can represent you in negotiations with creditors, including HMRC. It is important to seek professional advice as soon as possible if you are facing difficulties paying your CIS tax to ensure that you fully understand your options and to avoid further consequences.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.