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How does CIS impact your business?

Understanding CIS helps make your tax obligations clear

What is CIS?

The Construction Industry Scheme (CIS) is a tax designed to increase revenue collected from the construction industry. 

The scheme requires contractors to deduct money from subcontractor’s payments and pass it across to HMRC as tax.

Who does it apply to?

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

Am I a contractor or a subcontractor?

It is possible to be both a contractor and a subcontractor. 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?

The majority of construction work is covered including:

  • Permanent or temporary buildings or structures
  • Roads, bridges or other civil engineering works
  • Under CIS, 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 I 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; and if they are unregistered, a 30% deduction is needed.

All deductions must be passed on to HMRC.

What happens if I fail to pay?

As the contractor, it’s your responsibility to deduct the right amount of tax from your subcontractors.

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 e.g. May’s returns must be made by 19th June. Late returns will incur penalties starting from £100 for one missed day.

We can do it all for you

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 all of your subbies is correct and pay the right amount of tax to HMRC on your behalf.

For assistance with your subcontractors and peace of mind that you won’t be faced with an unexpected fine, get in touch today.

 

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