Construction Industry Scheme: What are my responsibilities as a contractor?

(3 minutes to read)

As a self-employed professional working in the construction sector, you’ll need to know all about the Construction Industry Scheme (CIS) and how it works.

Here we take a look at what you need to know about your CIS responsibilities as a contractor.

What is the Construction Industry Scheme?

CIS is essentially a tax deduction scheme with the aim of preventing fraud and tax evasion within the construction sector.

With HMRC concerned that there may be subcontractors carrying out work for bigger companies and not declaring the money they’ve earned, the scheme has the contractor withhold some of the subcontractor’s earnings to pass onto HMRC, which will then go towards the subcontractor’s tax and National Insurance (NI).

For more information on CIS, take a look at our Construction Industry Scheme page.

What are my responsibilities as a contractor?

One of the first things you may need to do as a contractor is register for CIS.

If your business deals with construction work for buildings in any way, including site preparation, decorating and refurbishment, and you hire subcontractors, then it’s likely you’ll need to register.

It’s worth noting that there may be certain situations where you don’t need to register, such as if your work is paid for by a charity or trust.

For more information about this, read our How do I register for the Construction Industry Scheme as a contractor? page.

You must ensure that you register for CIS before you hire your first subcontractor.

Other contractor responsibilities include:

– Verifying your subcontractors

You’ll need to verify every subcontractor you hire – you can do this either by using the free HMRC CIS online service or via commercial CIS software, and you’ll need to have certain information, such as UTR and NI numbers, in order to complete the form.

For more help with this, read our How do I verify a subcontractor for the Construction Industry Scheme? page.

You won’t be able to pay a subcontractor until you verify them

– Deducting CIS tax from the contractor’s payments and paying them on to HMRC.

The amount of tax you deduct from your subcontractor will all depend on whether or not they are registered for CIS.

Unlike a contractor, a subcontractor doesn’t have to register, however, in doing so, they will have a 20% deduction rate; for unregistered subcontractors, this figure increases to 30%.

A contractor could also have a ‘gross payment’ status where they have a 0% deduction rate. This means you pay them in full and it is then their responsibility to pay their own tax and NI at the end of the tax year.

For more information on tax rates and how to deduct and pay CIS tax to HMRC, read our Construction Industry Scheme tax rates page.

– Filing monthly returns and keeping full CIS records

Every month, you’ll need to tell HMRC about payments you’ve made to subcontractors via your monthly return, and you must declare that the subcontractors listed are not employees.

You’ll also need to keep records of the gross amount of each payment invoiced by subcontractors, excluding VAT and any deductions you’ve made from subcontractor payments.

Failing to do either of these could result in penalties.

– Keeping HMRC up-to-date with any changes to your business

You’ll need to let HMRC know of any changes, such as a change of business address, or if you stop trading or using subcontractors.

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.

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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.

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