Crazy Tax Authorities...
Buy-to-let landlords whose business includes buying and developing a property or converting properties into flats to let - will fall into the definition of 'contractor' and thus be required to operate the New CIS. A contractor is any person carrying on a business which includes construction operations (FA 2004 s59(1)(a)). Construction operations is defined in FA 2004 s74(2) as including: repair, alteration, extension ...of buildings or structures, and also painting or decorating the internal or external surfaces of any building or structure.
I read the legislation as there is no de minimis limit on this definition. The £1m limit only applies to FA 2004 s59(1)(b) to (f) and (h) to (k), i.e. persons not carrying on construction operations. So 'developing' landlords will come within the New CIS even if they spend under £1m a year.
Therefore "landlords" who "develop" they will need to register with the scheme, .
The other issue that has been raised is buy to let landlords with landlord repairing tenancies. If they are required to do certain types of work on the properties, and they pay someone to do it (ie a subcontractor) then they will also need to register under the rules as they presently stand.
The current responsibilities can be found here:
However, a summary of them are:
From now on you will ....
1) verify all new subcontractors are registered with HMRC before they can be paid (this can be done using special software or on the telephone) and record the UTR (unique tax reference) given.
2) be able to demonstrate you have reviewed employment status of each subcontractor each month
3) provide to HMRC (within 14 days of the end of each month) a return detailing every payment made to every subcontractor
4) provide (again within 14 days) a monthly declaration confirming you have verified every
5) provide payslips to each contractor (if you do not have specialized software you will have to buy or create these).
6) Submit “Nil returns” if you make no payments.
- fail to send, or are late with, any declaration or return
- cannot prove you have both verified each subcontractor and considered his employment status monthly, or
- you fail to deduct the correct rate of tax
YOU ARE LIABILE TO PENALTIES OF:
- Up to a £3,000 for every month
- 100% of any tax underpaid
- Loss of your own gross payment status.
Whilst I am aware this is crazy for the amount of work that most landlords do, it is the law, and came into place on 6 April 2007. Hopefully all your accountants will have brought this to your attention, or your tax advisors. If not, as i have mentioned on here before, get a tax advisor who knows what he (or she) is talking about!