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Chartered Accountants since 1919
The construction industry scheme (CIS) may be more than 50 years old, but the rules have never been easy to master. For instance, carpet fitting is handled one way, but lino fitting another. Either way, your business needs to be compliant.
The scheme sets out rules for contractors to handle payments to subcontractors for construction work. Contractors and subcontractors engaged in construction operations are widely defined for these purposes. This includes construction, alteration, repair, extension, demolition or dismantling of buildings or structures – whether it’s permanent or not.
CIS healthcheck
Penalties for failures can be very expensive, accruing quickly and difficult to resolve. This can have a direct impact on your operational efficiency.
Our employer solutions team can undertake a CIS healthcheck, either as a standalone review or as part of a PAYE healthcheck.
In this instance, you are a “mainstream contractor”. A mainstream contractor is a business that pays subcontractors for construction work. This would usually be a construction business, for example a property developer or builder.
As a contractor, you must:
Register with HMRC
Make monthly returns to HMRC
Verify the identity of your subcontractors
Provide monthly statements to your subcontractors paid under deduction
If your subcontractor is not registered for gross payment, you need to deduct tax from your payments to them and provide statements to inform them of this. You must also pass any deductions made from payments to those subcontractors who are not gross paid to HMRC.
In this instance, you are a “subcontractor”. Although, it is possible to be both a contractor and a subcontractor.
Subcontractors must register with HMRC to receive gross payments or, if you fail to meet certain conditions, net of 20% CIS tax. If a subcontractor chooses not to register, the deduction amounts to 30%. These deductions count as advance payments towards the subcontractor’s tax and national insurance bills.
In this instance, you are a “deemed contractor”.
Yes, even if your business is not strictly a construction business, CIS may still affect you. A business will be a deemed contractor if payments under construction contracts exceed £3,000,000 in the previous rolling 12-month period.
Certain types of work are exempt from the scheme, such as professional work. For example, this involves architecture and surveying, scaffolding hire, or delivering materials. However, if a single contract covers some construction operations as well as other matters, HMRC will treat the whole contract as falling within CIS. This includes raising separate invoices for the different jobs.
We will help you negotiate the complexities and risks associated with CIS, including:
