What are your options if you fall into arrears with CIS payments?
If you’re facing challenges in meeting Construction Industry Scheme (CIS) payments, it’s crucial to take prompt action. Delay can rapidly escalate into a cycle of debt for your business, potentially leading to insolvency.
HMRC enforces a strict tax regime and imposes significant penalties for late CIS returns. These penalties not only contribute to the company’s financial distress but also signal to HMRC that the business is grappling with financial issues.
What is the Construction Industry Scheme?
The Construction Industry Scheme is a tax system involving businesses in the industry collecting tax on behalf of HMRC. Operating within this scheme can be complex, as businesses may simultaneously function as contractors and sub-contractors or exclusively as one of them.
Keeping up with the necessary paperwork, CIS returns, and payments can be challenging. Accuracy is paramount, as HMRC thoroughly examines returns and payments to ensure correct collection and payment amounts.
For contractors, it’s essential to record the gross amount (excluding VAT) of sub-contractors’ invoiced payments and any deductions made. Additionally, sub-contractors’ invoiced costs of materials must be accurately documented.
If you find yourself unable to afford to pay your Construction Industry Scheme tax, and are unsure of potential outcomes, seeking professional insolvency advice is the first step. This ensures you can take appropriate action based on your business’s specific situation
Licensed insolvency help when you can’t pay CIS tax
A licensed insolvency practitioner can evaluate your company’s financial standing and assess the risk of insolvency. Seeking independent advice well before debts become unmanageable is advisable, and Vanguard Insolvency can provide assistance.
The primary goal of our licensed insolvency practitioners is company rescue. We will clearly outline your options and elucidate the advantages of each. Depending on the extent of the debt, this may involve negotiating with HMRC on your behalf or exploring alternative finance options to enhance your cash flow.
Maintaining a healthy cash flow is crucial for averting irreversible financial decline. We can offer reliable guidance on cash forecasting, implementing contingency plans, and emphasise the importance of monitoring the inflow and outflow of cash in your business.
So what options might you have if you can’t pay your CIS tax?
HMRC Time to Pay (TTP) arrangement
The Time to Pay (TTP) scheme administered by HMRC provides an opportunity for additional time to settle tax arrears, including Construction Industry Scheme (CIS) payments. Taking swift action by reaching out to HMRC is crucial, demonstrating proactive efforts to address your company’s financial challenges.
In the context of CIS, where tax is collected on behalf of the Treasury, any withholding of payments may prompt swift action from HMRC to recover arrears. HMRC is known for taking quick measures, including closing down insolvent companies. However, reaching out to them in advance of a missed payment can significantly strengthen your case.
A TTP arrangement typically allows for an extra 3-6 months to pay, with the potential to secure an additional 12 months. With our extensive experience in dealing with HMRC, we understand their systems and can negotiate on your behalf, presenting a robust business case to support your application.
Alternative funding
If your company’s sole debt is related to Construction Industry Scheme (CIS), a Time to Pay arrangement might be sufficient to address the issue and help your business weather the challenge. However, when facing multiple debts or experiencing a broader financial decline, seeking alternative funding becomes crucial for sustaining cash flow over the long term.
Invoice finance is one form of alternative funding that can offer essential support. This financing method involves receiving regular cash injections each month. The lender advances a portion of each invoice ahead of your customers’ payment, providing you with the confidence to operate and plan for the future.
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Company Voluntary Arrangement (CVA)
HMRC might consider approving a Company Voluntary Arrangement (CVA) that includes Construction Industry Scheme (CIS) arrears. To be eligible for a CVA, a licensed insolvency practitioner must assess your business as viable. A CVA is a formal installment plan that encompasses multiple debts.
If your business qualifies, a Company Voluntary Arrangement provides an opportunity to guide your company back to profitability, typically over a five-year period.
For more information and impartial advice on handling difficulties with paying Construction Industry Scheme tax, please reach out to our partner-led team. Vanguard Insolvency offers free, same-day consultations and operates an extensive network of offices around the country.
I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.