CISR12170 - The Scheme: contractors: paying over deductions

SI2005/2045 reg 7, requires a contractor who is liable to make deductions under CIS to pay those deductions over to the relevant HMRC Accounts Office within

• 14 days of the end of the month, or
• if paid electronically, 17 days of the end of the month.

However, where the total of deductions due in respect of the combined PAYE/ITSC obligations of a contractor will, on average, total less than £1,500 each month, SI2005/2045 reg 8 allows the contractor to pay over deductions within

• 14 days of the end of the tax quarter, or
• if paid electronically, 17 days of the end of the tax quarter.

Regulation 9 directions

Where a contractor fails to pay over deductions which are due the contractor may maintain that there are mitigating factors and apply for a direction under SI2005/2045 reg 9 to be made.

The procedures relating to Regulation 9(5) directions are described in detail in the section at CISR83000. Regulation 9(5) replaces Regulations 10(3) and 10(4) of the old CIS Scheme.

Interest on late payments

SI2005/2045 reg 14, provides for interest to be charged at the same rate as for late payments of Income Tax where a contractor fails to pay over deductions and the failure continues beyond the end of the tax year. This applies whether or not the deductions have been included in a Regulation 13 determination (see CISR82000). Regulation 13 replaces Regulation 14 of the old Scheme.

You should note that this interest

• is payable without deduction of Income Tax by the contractor
• does not qualify as a deduction in the computation of income, profits or losses for tax purposes
• is calculated and levied by the Debt Management and Banking (DMB) section.

Interest on overpayments

SI2005/2045 reg 15 provides for overpayments to qualify for a repayment supplement. The same may apply where a Regulation 13 determination is reduced resulting in an overpayment.

Company subcontractors - setting off the deductions

SI2005/2045 reg 56 provides that subcontractors that are limited companies can set off deductions they bear on their receipts against the following sums payable to us.

• employers’ and employees’ National Insurance contributions (NICs) due
• Pay As You Earn (PAYE) tax due from the company’s employees
• Student Loan repayments due from the company's employees
• any refunds due to HMRC in respect of various statutory schemes, for example, SSP and SMP
• sums deducted from subcontractors.

The company will need to reduce the amount of PAYE, NICs, Student Loan repayments and any CIS deductions that the company pays by the amount of CIS deductions made from the company’s income.

If, for any month or quarter, the company's own CIS deductions are greater than the PAYE, NICs, Student Loan repayments and CIS liabilities payable, the company should set off the excess against future payments in the same tax year.

At the end of the tax year, once we have received the company's P35 annual return, any excess CIS deductions that cannot be set off may be refunded or set against Corporation Tax due. No repayments or set off against other liabilities can be made in-year.

Companies must keep a record of the amounts set off so they can complete their annual employer returns. Companies may keep their own records for this purpose or they may use form CIS132, ‘Record of amounts set-off’ that we will send to them each year.