Are you in Construction? need a little reminding of the CIS Scheme?

As you probably know The Construction Industry Scheme (CIS) is a tax scheme created by HM Revenue & Customs for contractors and subcontractors.  Now remember CIS rules apply to all payments made by a contractor to a subcontractor under a construction contract, but does not apply to employees.

So what happens?

Under the CIS scheme contractors deduct money from a subcontractor’s payments and pass it to HMRC – contractors act as the middle men.

The deductions count as advance payments towards the subcontractor’s tax and National Insurance.

Contractors must register for the scheme. Subcontractors can but do not have to. 

Subcontractors, there is a reason you may wish to register 

By law you do not have to register with the CIS scheme HOWEVER deductions are taken from subbies payments at a higher rate if they are not registered. Currently registered tax is 20% at source if unregistered you will be hit with 30%.

So who counts as a contractor or subcontractor?

Register as a contractor if either:

  • you pay subcontractors for construction work
  • your business doesn’t do construction work but you spend an average of more than £1 million a year on construction in any 3-year period

 

Register as a subcontractor if:

  • You do construction work for a contractor
  • You must register as both if you fall under both categories

 

Work covered by CIS

CIS covers most construction work to:

  • a permanent or temporary building or structure
  • civil engineering work like roads and bridges
  •  

For the purpose of CIS, construction work includes:

  • preparing the site, eg laying foundations and providing access works
  • demolition and dismantling
  • building work
  • alterations, repairs and decorating
  • installing systems for heating, lighting, power, water and ventilation
  • cleaning the inside of buildings after construction work
     

Want to know the Exceptions to the rules?

You don’t have to register if you only do certain jobs, including:

  • architecture and surveying
  • scaffolding hire (with no labour)
  • carpet fitting
  • making materials used in construction including plant and machinery
  • delivering materials
  • work on construction sites that is clearly not construction, eg running a canteen or site facilities
     

Is your business based outside the UK?

The same rules apply if your business is based outside the UK, but you do construction work as a contractor or subcontractor in the UK

For further info about this scheme ring 01603 720424 and chat with our CIS expert or email eileen@hornbeam-accountancy.co.uk