The Construction Industry Scheme (CIS) is a set of rules for tax and national insurance for people working in the construction industry. Contractors often engage independent subcontractors to work on projects with them, rather than employing staff. Because these subcontractors are not employees, they can’t make income tax and national insurance contributions through PAYE. Instead, HMRC uses CIS to collect tax contributions from subcontractors. Contractors deduct a percentage of the money they pay a subcontractor, and that money is paid directly to HMRC.
To be ready to take part in the CIS as a contractor or a subcontractor, you need to register with HMRC. For contractors this is often done when you register for PAYE, by ticking a box that asks ‘Will you be engaging any subcontractors in the construction industry?’. Contractors can do this online or by telephoning HMRC and providing your personal details, Unique Taxpayer’s Reference and VAT number, if you have one.
It is not the law to register with CIS as a subcontractor, but it is worthwhile. If you are registered the contractor must deduct 20% of the amount of your invoices, whereas if you choose not to register they must deduct 30%.
The Construction Industry Scheme is an extra administrative burden that small and medium-sized enterprises can do without. Unless you have specialist staff employed already, it is a complex task to set up and maintain. AK Tax can take the burden off your shoulders and enable you to get on with your work whilst we ensure that your business is 100% compliant.
Our comprehensive service includes everything from registering your company with HMRC and adding and verifying subcontractors to processing payments and submitting your monthly return to HMRC. By putting all your CIS tasks in our safe hands, you will reduce the risk of penalties, which start from £100 if your CIS return is even one day late. We do all the hard work and look after all the small details so you can get on with growing your business without worry or distraction. Alternatively, we can help you with the initial set up and then step back whilst you do the rest. We’re flexible, friendly and here to help.
If you’re just beginning work as a contractor and need to check that you’re registered for CIS with HMRC, just call their CIS helpline on 0300 2003210. We’d advise calling early in the morning, around 8 when the lines open, as this saves waiting in a queue for ages.
CIS doesn’t apply to delivery of materials to site, architecture or survey work, scaffolding hire without labour or fitting of carpets. It also doesn’t apply to facilities on site that are not construction, such as catering. For contractors, CIS also doesn’t apply if you are being paid by a charity or trust, you are working on your own business property or you are working on a school and being paid on behalf of an education authority.
It’s a simple matter of filling in a form. HMRC runs a dedicated helpline, or you can find guidance online at the GOV.UK website. All contractors must register. It is voluntary for subcontractors but does entitle you to a lower rate of tax deduction.
For the purposes of CIS, construction work covers site preparation; demolition and dismantling; building work; alteration, repairs and decorating; installing heating, lighting, power, water and ventilation systems, and cleaning inside buildings are construction work.
The contractor deducts the qualifying materials (the costs the subcontractor has incurred) from the gross amount (the total to be invoiced). This leaves the labour amount. From this amount the contractor deducts either 20% or 30%, depending on whether the subcontractor is CIS registered or not. This deducted amount is paid to HMRC.
Yes, you must register for CIS if you are a contractor. Failure to do so can lead to penalties running into tens of thousands of pounds.
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