Crystal Umbrella

HM Revenue and Customs has released new guidelines regarding penalties for anyone who may fall under the umbrella of the Construction Industry Scheme, or CIS.  The purpose of the new guidelines is to encourage people to comply with regulations related to CIS by trying to alter behaviour patterns.  The new guidelines are also meant to be just and not overly aggressive.

A recent study conducted by MORI revealed that people might view paying taxes as less of a priority than other bills that might be due at the time.  As times are difficult during the current recession, some people are choosing to pay bills that will allow them to keep their business running instead of paying their taxes.  If HMRC were to impose harsher penalties, they could potentially put a number of companies out of business.  The goal of the new guidelines is simply to come up with reasonable penalties.

According to the document released by HMRC “There is absolutely no doubt that in considering how to encourage people to file returns and pay tax due on time, penalties are only a small part of the picture. Simplifying those obligations where possible, clearly communicating what taxpayers need to do, and providing accessible targeted support, are likely to have more effect than penalties on their own.”

It does appear that penalties can be effective.  In instances where no penalty is issued for a late payment, the rate of payment is frequently lower.

Source: www.accountingweb.co.uk

It has been decided that several people who were working with JL Windows and Doors were actually working for themselves.  While the Special Commissioner, John Clarke did say that they were only barely working on their own he also noted that they should not be thought of as employees of the window company.  The case began over a disagreement over the employment status of the workers in question with regards to the Construction Industry Scheme, or CIS.

The Littlewood family, which owns JL Windows and Doors, claimed that anybody who was working with their company was a contractor and not an actual employee of the company.  These same workers have said that they were actually employees.  The amount of National Insurance Contributions and income taxes that the workers owed would vary depending on their actual employment status.

Mr Littlewood said he would use the workers’ CIS cards to determine if they were actually self-employed or not.  From there he would reduce the workers’ income by 18% to account for deductions owed to HM Revenue and Customs.

Clarke said “Although there was mutuality of obligation in the separate contracts, JL Windows did not exercise a sufficient degree of control over the workers to make itself master.”  He also added that “I do not find the other provisions of the contracts consistent with their being contracts of service. I find that the workers were in business on their own account, albeit in a modest way.”

Source: www.shout99.com