The Construction Industry Scheme (CIS) covers the whole of the UK construction industry. It is the government's taxation scheme which sets out the rules on how payments for construction work should be handled.
CIS Identity Check
A check carried out when a subcontractor first registers for CIS with HMRC to confirm the identity of the subcontractor, by the production of certain documents.
A composite company was a system where a number of people were placed within the same limited company and were paid a portion of their income as a dividend on a share, saving them tax, national insurance and allowing them to claim expenses. This system is no longer profitable as it falls within the MSC legislation of 2007 and is a potential
IR35 risk.
Contracted Pay
When you work through a Zeva Umbrella Company you are contracted to work at the National Minimum Wage. You may receive additional payments as profit related pay.
HMRC may grant dispensations for certain categories of expenses. This means that the Umbrella Company does not need to declare these expenses on a P11D. It doesn't mean that you can claim expenses without appropriate receipts.
Expenses are the main way you benefit from a Zeva Umbrella Company; they are reimbursed from your Zeva Umbrella Company and form part of its business costs.
Any expenses must be solely and necessarily incurred for the performance of your duties as per HMRC guidelines. Tax laws are very strict in defining which expenses can be claimed. The total amount of the expenses you claim (not including mileage which does not need to be shown) will be shown on your form P11D.
We send this to the HMRC on your behalf at the end of each tax year. If the HMRC chose to review your individual case and rule that some of the expenses claimed were not legitimate, you would become personally liable for any tax due as a result.
Business expenses are the expenses that are associated with running your business.
Personal income tax, sometimes known as PIT is a tax levied on a person’s income. It is a tax that is often collected on a pay as you earn basis with minor corrections made just after the end of the tax year. This tax is collected by HMRC.
Status allocated to a subcontractor that permits payments in respect of 'construction operations' to be paid to the subcontractor without CIS deductions.
HMRC (Her Majesty's Revenue and Customs)
HMRC (formerly the Inland Revenue) was formed as the merger of the Inland Revenue and Customs & Excise. More information on the HMRC can be found at:
www.hmrc.gov.uk
BACS or Bankers Automated Clearing Services is a UK based scheme for the electronic processing of payments or financial transactions.
HMRC Verification
Verification is the process by which a subcontractor's tax treatment by a contractor is determined. A contractor 'verifies' a subcontractor with HMRC (i.e. checks that they are registered and what tax they should be paying - higher rate of 30 per cent if they are not registered, 20 per cent if they are registered to receive payment with tax deducted or gross pay if they are registered as qualifying for gross payment status as is Zeva.)
Holiday Pay
All companies must provide paid holiday for 28 days per year including Bank Holidays. This must be pro-rata across the year (i.e. if you worked six months, you get 14 days). Your Umbrella Company will reserve enough money to pay holiday pay according to the hours you've worked. Holiday pay is reserved at minimum wage, your contracted pay rate (i.e. the minimum wage).
Inland Revenue Personal Reference (IRPR)
A temporary reference used when a subcontractor has not yet been allocated a National Insurance number (NINO).
Insurance
Employers Liability Insurance
For employees we pay this – it's at no cost to you. This means that the people you go and work for will be happy as their insurance will be kept lower and they will be safe in the knowledge that, should the worst happen, they will be able to claim on our insurance. Unfortunately offshore workers, miners and power linesmen are excluded from this.
We can secure this insurance for you – we have actually already got it in place for those professions we and our insurers deem to be in need of it. So if you are responsible for decision making which can then impact on others (such as a surveyor) you have no worries as you are safe and fully insured with us.
Public Liability Insurance
For employees this is paid for by us – you don't have to worry and can relax knowing that if you do cause an accident that affects others, our insurance company will be right onto it. Unfortunately offshore workers, miners and power linesmen are excluded from this.
IR35 Rules and Legislation
Up to April 2007 independent subcontractors had been able to legitimately reduce their tax burden by using a corporate structure where they took the majority of their income as a dividend, thereby minimising their taxation and NIC.
National Insurance
'Class 1 employed earner' NI contributions are deducted in a Zeva Umbrella Company. In 08/09 the first £105 per week of gross earnings is NI free and anything above this attracts NI at a rate of 12.8%.
Employees National Insurance
As a Zeva Umbrella Company employee you pay 'Class 1 employed earner' NI contributions. In 08/09 this means the first £105 of gross earnings per week is NI free, the next £665 is at a rate of 11% and anything over £770 in the week is at a rate of 1%. If you are over state retirement age and have provided us with your ‘Age Exemption Certificate' then you will be exempt from paying employee NI.
The National Insurance Contribution (NIC) Holiday was announced in June 2010 and will come into effect in September 2010, providing new businesses with a
holiday from paying NICs.
National Minimum Wage
The government has set a minimum wage all employers must abide by. Each year this is reviewed (normally in the Autumn), and it is increased in line with inflation. Since October of the 2008-2009 tax year the minimum wage for workers aged 22 and over is £5.73 per hour.
National Insurance Number (NINO)
A number allocated to an individual registering to pay National Insurance contributions for the first time. A NINO follows the following structure: LL/NN/NN/NN/L where L stands for letter and N for number.
A tool that calculates how much agencies and employees can save by using an umbrella company.
Offshore Companies
Some payroll service providers for temporary contract workers pay their members through Offshore Companies. These are companies incorporated outside of the UK mainland, and where there may be little government control and / or low taxation regimes. If your work is mainly carried out within the UK mainland, using such a service puts you at significant risk of HMRC's tax-avoidance measures and you may be liable for unpaid taxes.
With Zeva's HMRC compliant payroll service, (which IS registered in the UK and complies with all UK taxation and employment law), you are able to make the most of the money you earn whilst being confident that you're paying the correct levels of tax under current HMRC legislation, eliminating your risk of receiving a substantial and unwelcome tax bill.
PAYE is a system of tax collection used by employers to collect tax and National Insurance from employees.
IR56
IR56 provides guidance on the employment status of individuals for tax purposes. It was introduced by HMRC to help determine whether an individual is deemed employed or self employed. Get the latest
IR56 advice here.
A P11D is a statement of any expenses you've claimed during any given financial year. P11D's don't include mileage expenses. Your P11D should arrive around July the 6th each year that you have claimed expenses.
P45
You get a P45 from your employer when you stop working for them. It's a record of your pay and the tax that's been deducted from it so far in the tax year. It shows:
- your tax code and PAYE (Pay As You Earn) reference number
- your National Insurance number
- your leaving date
- your earnings in the tax year
- how much tax was deducted from your earnings
A P45 has four parts - Part 1, Part 1A, Part 2 and Part 3. Your employer sends Part 1 to us and gives you the other three. When you start a new job, or claim Jobseeker's Allowance, you give Part 2 and Part 3 to your new employer or to the Jobcentre. You keep the remaining one - Part 1A - for your own records.
Your employer should automatically give you a P45 when you stop working for them. If not, ask for it - you're entitled to it by law.
P46
A P46 is a form you should fill in if you have not received a P45 from your previous employer. It will allow HMRC to assess the tax you have paid and notify you/us of the tax code you should be on, although this can take a number of weeks to resolve. If you have not handed Zeva your P45 nor filled in a P46 you will have to be placed on a basic rate tax code (sometimes incorrectly referred to as an emergency tax code), so it is vital that you hand in one or the other ASAP.
P60
Your P60 is the summary of your pay and the tax that's been deducted from it in the tax year.
Your employer should give you a P60 to keep as a record at the end of every tax year (which runs from 6 April to 5 April the next year). If your employer doesn't give you a P60 at the end of the tax year, ask for it - you're entitled to it by law if you are still working for the employer at 5 April. You might need it to:
- complete a Self Assessment tax return, if this applies to you
- claim back any tax you've overpaid
- apply for tax credits
You may also need it as proof of your income if you apply for a loan or a mortgage - so it's important to keep all your P60s safe.
S660 rules have been around in one form or another since the 1930’s. Original rules stated that you cannot pass income to someone else in your family in order to reduce your tax bill.
Statutory Payments - Statutory Sick Pay / SSP
SSP is paid to employees who are unable to work due to illness. As the name suggests this is a statutory payment but there are conditions that have to be met before a person qualifies.
If you do qualify the payment set down by the government is currently set at £75.40 per week for employees that have average weekly earnings exceeding £90.00.
SMP is a payment made to women who are about to or have just had a baby. It is intended to replace any payment that you would otherwise have earned during your pregnancy and subsequent early months of your baby's life, allowing you to keep yourself and your baby healthy.
The amount you are entitled to is set down by UK law but is available for a maximum of 39 weeks. For more information on Statutory Maternity Pay, click here.
Single person companies became popular in 2003 and as the name suggests they are formed by a single employee.
For temporary contract workers working in the IT industry, Zeva provides value-for-money HMRC compliant payment services – each one specific to an individual’s employment and contract status.
HMRC state that “expenses must be incurred wholly, exclusively and necessarily in the performance of your duties”. As such, the HMRC can at any time review your expenses and if they are deemed not to have been incurred in the performance of your work duties then you are liable at best for additional tax, and possibly charged with fraud.
Overarching contracts are for professional contractors who seek a succession of jobs through an umbrella company such as Zeva. Your contract of employment is an overarching contract and enables contractors to establish a permanent workplace at their home.
The 24 month rule applies to many contractors and allows them to claim expenses provided that their place of work meets the HMRC definition of a temporary site.
Before the introduction of new legislation in the Finance Act of 2008 thousands of contractors used offshore tax schemes.
Statutory Paternity Pay / SPP
SPP is a payment made to a man who's about to become a father. The amount is £117.18 or 90% of your average weekly earnings, whichever is lower. For further information on Statutory Paternity Pay, click here.
Umbrella Company
An Umbrella Company is a payment system for temporary contract workers. Umbrella Company schemes are NOT included within the Managed Service Company (MSC) legislation 2007 - therefore using an
Umbrella Company to administer your PAYE earnings carries none of the MSC debt transfer risks to the contractor.
In turn, the Umbrella Company acts as a single limited company for a large number of workers who operate within Pay As You Earn (PAYE)
As an employee of Zeva Umbrella, income is paid as a combination of salary and legitimate HMRC approved business expenses. Thus you can maximise your take home pay while being secure in the knowledge that the necessary deductions for PAYE tax and NIC are being made. At the same time you take advantage of the statutory benefits of being employed e.g. holiday pay and statutory sick pay (SSP).
Take home pay is the amount of pay that a contractor takes home after tax. When working with an umbrella company the umbrella company becomes your employer and in turn is responsible for processing expense claims and taxes.
Contractors incur costs for a variety of things in the course of their work.
HMRC describe self billing as an arrangement between a customer and a supplier in which the customer prepares the suppliers invoice and sends a copy to the supplier with the payment details attached.
One of the easiest ways to setup a business is by becoming a sole trader. This is because it doesn’t involve paying any registration fees and keeping accounts and records is relatively straight forward.
A unique taxpayer reference or UTR is issued by HM Revenue & Customs when you register for self assessment. A UTR number is made up of ten numbers and can be found on tax return, notice to complete tax return or statement of account documents.
A reference allocated to any individual registering to pay income tax under Self Assessment
A payroll outsourcing provider is a company that specialises in accounting and payroll. Many companies choose to outsource payroll because of the legal and cost implications.
Also go to HMRC's website
