CIS is an HMRC initiative that essentially acts as a way to gather tax revenue from the construction industry and minimise tax evasion.
Once you are registered, it is your responsibility as the contractor to calculate and deduct the right amount of tax due from the total earnings. You need to then make one payment to HMRC and the other to your subcontractor.
The amount of tax you need to deduct depends on the status of your subcontractor. You can confirm their status by verifying them with HMRC who will confirm if they should be deducted tax at 20%, 30% or 0% for those with a gross payment status. You also need to understand which parts of the subcontractors payment should be subtracted prior to working out the tax deduction.
Find out more information on the verification process here.
Each month you must pay HM Revenue and Customs any deductions you have made. You must also complete a monthly return, called CIS300, which details all payments you have made under CIS. This is done through your Government Gateway. There are deadlines and penalties for failing to send the information through or if the information is wrong. The penalties start at £100 and go up to £3,000 or 100% of the CIS deductions – whichever is higher.
CIS is complicated and the financial implications of getting it wrong are costly. So if you find yourself confused by the legislation, short of time or simply don’t want the hassle of dealing with HMRC, we can help. Since 1996 we’ve helped construction companies of all sizes with CIS obligations. Over 2,000 companies now trust us with contracts and compliance and we can help you too.
If you’d like to know more about what we can do, get in touch today.
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