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Quick Guide to CIS: How it works and what you need to do if you go it alone

How the Construction Industry Scheme impacts your business

Do you have to register, and what will you have to do?

The Construction Industry Scheme (CIS) is a tax designed to increase revenue collected from the construction industry. Contractors are required to deduct money from subbies’ payments and pass it across to HMRC as tax.

Who does it apply to?

CIS applies to you (the contractor) if you pay subbies to work or if your business spends upwards of £1 million over three years.

Are you a contractor or a subcontractor?

It is possible to be both! For example you might take on a job and contract it out to someone who is self-employed or you might accept work as a subcontractor.

What work is covered under CIS?

Most construction activity is covered including permanent or temporary buildings or structures, and roads, bridges or other civil engineering works.  Construction work includes:

  • Preparing the site, such as laying foundations and providing access works
  • Demolition and dismantling
  • Building work
  • Alterations, repairs and decorating
  • Installing heating, lighting, power, water and ventilation systems

What do you need to do?

Contractors are required to register for CIS. And it is the contractor’s responsibility to deduct the right amount of tax from subcontractors.

Before you can do this, you need to verify the status of your subcontractors with HMRC.

  • If they are ‘Gross’ no tax deduction is required;
  • If they are CIS registered, a 20% deduction is required;
  • If they are unregistered, a 30% deduction is needed.

All deductions must be passed on to HMRC.

What happens if you fail to pay?

As the contractor, it’s your responsibility to deduct the right amount of tax from your subcontractors and if you fail to correctly notify HMRC of your subcontractor payments then you may be faced with a fine of up to £3,000.

Returns must be made by the 19th of each month for the previous tax month - so May’s returns must be made by 19th June. Late returns will incur penalties starting from £100 for one missed day.

Is there an easy way to eliminate all of this?

Yes.  It’s called Hudson Contract!  

We carry out all the administration to make sure you’re fully compliant with HMRC and won’t come unstuck.  We make sure that the status of every sub-contractor is correct and pay the correct tax to HMRC on your behalf.

Hudson Contract clients cut out the administrative burden of CIS – along with all the risks. 

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