Reducing Risk When Using CIS – Beware of Assumptions on Hourly Rates

June 5, 2024

We recently launched a new FREE CIS Healthcheck service to help recruitment businesses use the scheme safely.

The healthcheck aims to identify risks you may be facing so you can tighten up systems and procedures to ensure your agency can place CIS workers with complete peace of mind.

Having specialised in CIS payments for 20+ years, we know the common pitfalls and issues that would prompt an HMRC investigation.

Common Pitfalls

There are four common pitfalls you should be aware of. We have previously written about the problems caused by lack of accountability. Another common pitfall, however, is using hourly rates as an indicator.

Hourly rate is one of the elements we would interrogate when assessing whether a contractor is a suitable candidate for CIS.

A lower hourly rate would suggest a less skilled or experienced candidate which indicates the potential need for Supervision, Direction and Control (SDC) and Mutuality of Obligation (MOO). The existence of SDC suggests an individual is told how to perform the task, and their work is monitored for quality and adherence to instructions.

In this way, they may be subject to SDC and therefore meet the criteria to be considered by HMRC as falsely self-employed. HMRC require a self-employed person to have a degree of autonomy over how they work.

Additionally, a lower rate of pay may suggest the worker may not have the autonomy to put forward a substitute if they are unable to perform the task themselves.

What to do

It’s important to ensure your consultants understand what types of occupations are or are not likely to be suitable for CIS payments. This will help avoid any issues and time-wasting whereby workers expect to be able to use CIS but who then go on to fail the necessary criteria.

FREE CIS Healthcheck

Our new CIS Healthcheck service will give you and your team the assurance you need to know you are operating in compliance with HMRC’s rules.

The Healthcheck is a detailed audit and results in a report and recommendations on areas of strength and weakness, enabling the organisation to address any areas of concern. Furthermore, it enables you to demonstrate due diligence in managing supply chains which is a critical component required by HMRC.

There is no charge for the healthcheck service and you can opt for it to be undertaken by a Crest Plus CIS expert or by our independent Chartered Accountant who is also a specialist in CIS.

Find out more about our CIS Healthcheck service, get in touch on 01244 684700 or download our guide to find out about the common pitfalls agencies face when using CIS, and how to avoid them.

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