What is the Construction Industry Scheme (CIS)
CIS applies to most payments for construction work from a contractor to subcontractor. It works similarly to PAYE. The contractor is responsible for deducting tax from the subcontractor’s earnings and paying that directly to HM Revenue and Customers (HMRC) on the subcontractor’s behalf.
Contractor vs Subcontractor role in the Construction Industry Scheme (CIS)
You are defined as a CIS contractor if you are working on projects in the construction industry and use subcontractors to do any or all of this work.
As a contractor, it is your responsibility to deduct tax from each payment to your subcontractors and pay this over to HMRC on their behalf every month. The rate of tax you deduct is dependent on the status of the subcontractor.
In addition to handling their CIS deduction, it is also your responsibility to provide each subcontractor with statements showing the deductions you have made against their earnings. Payments must also factor cost of materials that are deducted.
If you are a contractor and want help managing your payments and other tax matters then please get in touch.
You are defined as a CIS subcontractor if you are working on projects for contractors in the construction industry. The deductions do not apply to all types of work. In order to see a guide of all work that is and isn’t covered, view this CIS guide for contractors and subcontractors. Alongside typical construction work, CIS applies to jobs such as repairing and decorating.
As a subcontractor it isn’t necessary for you to register for CIS. However, if you do, you can reduce the tax deducted from the default 30% down to 20%. Furthermore, if you pass three the three tests summarised below, you can apply for “gross payment status” which will allow the contractor to pay you in full with no CIS deductions:
Deductions taken on a subcontractor’s behalf will count as advance payments towards their Income Tax and National Insurance contributions.
As this tax is deducted at source without factoring in the subcontractor’s annual tax-free personal allowance and any deductible expenditure, when they come to fill in your self-assessment tax return at the end of the tax year, it is common for them to receive a tax refund.
Under CIS it is also possible for you to be classified as both contractor and subcontractor.
How to Register for CIS
You can register with HMRC for CIS through the gov.uk website:
If you are both a contractor and a subcontractor, you will need to register for the Construction Industry Scheme separately as both.
We can manage this process on your behalf.
To allow a contractor to process CIS deductions subcontractors must provide their name, unique taxpayer reference and national insurance number (or company registration number) when entering into a contract. These details allow the contractor to check the CIS status of the subcontractor and deduct the correct amount of tax.
Additional Services to Help with Your Tax
Alongside advising on CIS, our team can help review your tax requirements to ensure you meet all regulations and deadlines set by HMRC. Whether you need assistance submitting a personal tax return or want to look at setting up a limited company, we can help prepare and plan how to optimise your tax position.
We provide all quotes free of charge. After a free initial consultation to understand your situation, we will explain what you will need from us along with our fees in advance. With DS Burge & Co supporting your CIS requirements there is total transparency on what you are getting.
Whether a CIS contractor or subcontractor, our fees will also be tax-deductible to you.
We already help a large number of clients in the construction industry. If you would like to find out more about CIS, and get a free quote, please don’t hesitate to get in touch.