Recent studies have shown that construction output is expected to grow by 1.7% over the next five years, with an estimated 179,000 jobs to be created.
As such, we are seeing an increasing number of new agencies being incorporated to specifically cater for the temporary staffing requirements of the construction industry. This however leads to specific issues regarding Construction Industry Scheme (CIS) gross status and an agency’s ability to have their invoices paid in full.
A recruitment agency trading within the construction industry will need to be CIS gross status, registered as both a supplier and a sub-contractor in order to have their invoices paid in full and comply with HMRC regulations.
There are certain regulations that need to be met in order for HMRC to grant CIS gross status to an agency, with the primary being a turnover of £30,000 per director with the current business in the supply of temporary recruitment services in the construction industry within the past 12 months.
What this leads to though is a “chicken and egg” situation. An agency needs to operate a temp business within the construction industry to obtain their gross status, however they cannot operate within the construction industry without already having their gross status!
Quba offer a solution to this problem with our Quba Principal model.
The Quba Principal model enables an agency to trade through Quba’s CIS gross status. In this instance Quba become the Principal Agent in the supply chain and the recruitment agency become an “Agent” of Quba. This has no impact on the services that the agency receive from Quba (100% finance, bad debt protection and full suite of back office services) but it ensures that the agency’s invoices will be paid in full with no 20% CIS deduction. Invoices and terms of business will be dual branded and will be from “Quba Solutions Ltd trading as Example Agency Ltd”.
The key part of Quba’s solution is that we actively support our agency partners to obtain their own CIS gross status, at which point we switch them to an Agency Principal contract. This then enables the agency to become the Principal Agent and show the full turnover on their books rather than simply the profit. At this point invoices and terms of business will still be raised/supplied by Quba but will be from “Example Agency Ltd” directly.
Many finance suppliers on the market will offer a solution whereby an agency can trade through their gross status, however most will only offer this model and will essentially handcuff the agency to the financier, rather than enabling them to switch onto an agency principal model. With Quba you have complete freedom to switch once you achieve your CIS gross status.
If you are interested in opening a construction-based recruitment business, or currently operate through another company’s CIS gross status but are restricted from trading through your own in the future, please give me a call on 07795 572916 for a confidential conversation.