Real Estate Tip of the Week: CIS - watch out for the quiet ones?

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Real Estate Tip of the Week: CIS - watch out for the quiet ones?

Published 15 October 2018

It is easy to focus on the obvious taxes of VAT and SDLT when buying, developing and letting property, but in life it is often the quiet ones you need to look out for.   

Whilst there are numerous exemptions, it is getting easier and easier to fall accidentally into the trap of being a (deemed) contractor for the purposes of the Construction Industry Scheme.  The cost of construction goes up year by year but the CIS threshold has stayed the same.  Once you spend more than £1million a year on average over three years, you must consider making tax deductions from payments to your construction supply chain and verify their status.  The £1million threshold hasn’t changed since 1995, so with inflation it has roughly halved in that time in real terms. 

The nasty effect of forgetting about this is two-fold:

  1. You are in practice underwriting the income tax or corporation tax payment obligations of anyone you pay for construction operations; an
  2. Simply forgetting to file returns can cost more than £30,000 per year just in missed return penalties.

If you remember to look at the rules from the start they are relatively straightforward; it’s when you forget them and look at them afterwards that they become tricky and painful.

Authors

John Dunlop

John Dunlop

London - Walbrook

+44 (0)20 7894 6330

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