CIS – Construction Industry Scheme

(3 minutes to read)

For a self-employed professional working in the construction industry, you’ll need to know all about CIS (Construction Industry Scheme).

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:

A contractor:

  • 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.

A sub-contractor:

  • 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
  • Repairs/alterations
  • Decorating
  • Installing systems for: heating, lighting, power, water and ventilation
  • Demolition

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 jaime.thorpe@dolanaccountancy.com.

You may also like to read

VAT Reverse Charge for Construction

What is the VAT reverse charge? Introduced on the 1st of March 2021, the VAT reverse charge is used for most ...

Read More

Energy Bill Relief Scheme

What is the Energy Bill Relief Scheme? The new scheme is designed to help non-domestic energy customers by providing financial assistance ...

Read More

Mini-Budget 2022

National Insurance It was announced earlier this year that NICs would be increasing as a ‘Health and Social Care Levy’ in ...

Read More

Why Dolan Accountancy?

Dolan Accountancy was set up by Simon J Dolan, the man behind the well-known brand SJD Accountancy. With over 25 years experience in the contracting marketing, Dolan Accountancy has the heritage, reputation and credibility you can trust. Working closely with our sister company, Contractor Umbrella, it means we can offer one low cost, fixed fee package at £105 + VAT per month. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost. We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours.
  • Free use of Contractor Umbrella – With changes in Public Sector IR35 Legislation we understand that sometimes you are required to contract via an umbrella company. We will keep your limited company ticking over, while you work margin free via our sister company, Contractor Umbrella.
  • A Dedicated Accountant – Your accountant will be there for any company or personal tax advice that you require. We will never outsource work, even to internal teams.
  • Free Access to FreeAgent – The founder behind the multi award winning FreeAgent platform was one of Simon’s first clients, therefore it only seems fitting that we offer all of our clients access to FreeAgent, free of charge.
  • Free Business Banking – We have decided to waive our commission so our clients can use Tide free of charge for the first year.
  • Unlimited IR35 Status Reviews – We will review all of your contracts for IR35 purposes and provide you with our professional opinion as to its status.
  • Free Registered and Director’s Service Office Address – Sometimes you just don’t want your home address on display at Companies House. When you sign up to our accountancy services, we will offer the use of our address as an alternative.
  • Your Business and Personal Taxation Needs – This includes Company Accounts, Director’s Personal Tax Return, VAT Returns, Payroll, Corporation Tax and Dividend advice, to name just a few.
  • Same day payments- We offer same day payments as standard providing funds are received into our account by 9am, for no additional fee.

If you’d like to find out more about how Dolan Accountancy can help you and your business, please give us a call on 01442 795100 or email sophie.lewis@dolanaccountancy.com or jaime.thorpe@dolanaccountancy.com.

dav1