What is the Construction Industry Scheme?
CIS is a tax deduction scheme affecting self-employed workers contracting in the construction sector.
The aim of the scheme is to reduce levels of fraud and tax evasion in the industry, as well as to help subcontractors to spread their tax liabilities over the financial year.
These deductions count as advanced payments toward the subcontractor’s tax and National Insurance.
In some ways, it is similar to the PAYE system for employees, in the sense that it requires contractors to withhold either 20% or 30% of the subcontractor’s payments and then pay this deduction to HMRC.
Do I have to register for the Construction Industry Scheme?
Both contractors and subcontractors are affected by CIS, with each having different responsibilities.
A contractor must register for the scheme.
A subcontractor doesn’t have to register, however, in not doing so, deductions are still taken from their payments, but at the higher rate.
If you’re not sure which category you fall under:
- pays subcontractors for construction work.
- might not have a business that carries out construction work, but has spent more than £3m on construction in the 12 months since you made your first payment.
- Carries out construction work for a contractor.
If you are a subcontractor and you’re also a sole trader, the owner of a limited company or a partner in a partnership or trust, then you will have to register.
It’s worth noting that it is possible to fall under both categories, in which case you’ll need to register as both.
What are my responsibilities as a contractor?
As a contractor, you will need to ensure that you register for CIS before you take on your first subcontractor.
Other responsibilities include:
- Checking that you should definitely be subcontracting the work to the worker instead of employing them. You’ll need to work out the employment status for an employee, which you can check on GOV.UK (you could end up with a penalty charge if you hire them as a subcontractor if they should be an employee).
- Check whether or not your subcontractor is CIS registered.
- Deduct either 20% or 30% from the subcontractor’s payments and pay to HMRC.
- File monthly returns and keep full CIS records – if you fail to do this then you may receive a penalty.
- Keep HMRC up-to-date with any changes to your business.
What counts as work covered by the Construction Industry Scheme?
The CIS covers most construction work that involves a permanent or temporary building or structure, as well as civil engineering work, such as roads and bridges.
Other examples include:
- Prepping the site for work and cleaning the inside of a building after work has been completed
- Installing systems for: heating, lighting, power, water and ventilation
There are certain situations where it may be a bit confusing as to whether your work counts as being part of construction or not.
You won’t need to register for CIS if you:
- Carry out work in architecture or surveying
- Fit carpets
- Make materials used in construction and deliver said materials
- Hire out scaffolding (with no labour)
- Work on a construction site, but it has nothing to do with construction (such as running site facilities)
We hope you found this page useful. If you have any further questions on CIS or anything else, our team of experts are available to answer any queries, so give us a call on 01442 795 100 or email firstname.lastname@example.org.