The Scheme applies to workers who, for particular contracts, are
self-employed and are not employees subject to PAYE. Employment
status depends on general law. Although the contractor may seek
your advice or that of the Department for Work and Pensions (DWP)
it is for the contractor to decide this when engaging the
subcontractor. The fact that the subcontractor is already
registered for CIS, for either gross or net payment, is irrelevant
in deciding the issue. It is the terms of the particular engagement
which matter in reaching a decision as to whether or not payments
are to be treated as caught by the Scheme or subject to PAYE.
The Scheme applies only where there is a contract between a
contractor and a subcontractor that is not a contract of
employment. Where a contract of employment exists, the
subcontractor is an employee and will continue to be liable to tax
on employment income through the PAYE system.
When giving advice to contractors on the operation of the Scheme
the question of whether an individual is an employee of the
contractor should not be overlooked.
You should initially refer the contractor to the HMRC
factsheet ES/FS2 ‘Are your workers employed or self employed
for Tax and National Insurance contributions’ available from
the HMRC website containing general guidance on employment status.
More detailed advice for contractors is also available in leaflet
CIS349 - 'Are your workers employed or self-employed?’ and
also available on the HMRC website at
www.hmrc.gov.uk/employment-status.
