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CIS & Subcontractors

You may have to comply to the Construction Industry Scheme if you are a subcontractor in the building industry or if you are a contractor and hire subcontractors in the building industry.  In this situation a deduction can be made from the labour amount of any invoice.  This includes builders, plumbers, electricians, tilers and other construction trades.  

You can use the dot navigation on the right to quickly find out more information on being a subcontractor, contractors using subcontractors, verifying subcontractors, Pay deductions to HMRC and when and how to pay.

I’m a subcontractor (I work for people in the construction industry)

Firstly you will need to register with HMRC if you have not already done so, both to be self-employed and to be a subcontractor. If you need assistance with this please contact us.

The same is true if you are a limited company , you will need to register your company as a subcontractor.

If you are a subcontractor you will be “verified” by the contractor in order to see which CIS rate should be applied, there are three rates:

0% is applied for subcontractors that have successfully applied for gross status

20% is applied for subcontractors that have been successfully verified but are not registered for gross status. Most subcontractors will fall under this.

30% is applied for subcontractors that have not been successfully verified. This could be because the information supplied is not correct or subcontractor is not registered as self-employed.

The purpose of the Construction Industry Scheme is to ensure that tax evasion is minimised in the construction industry. The downside is the work involved!

At the end of the year any tax deducted is taken off of any liability owed. If you have had more deducted than you owe – you get a refund!

I’m a contractor using subcontractors

To register as a contractor, you need to follow the process for setting up as a new employer.

Register as an organisation on the Government Gateway. You’ll need your National Insurance number and email address.

Register as an organisation for HM Revenue and Customs (HMRC) online services. You’ll need the unique taxpayer reference number (UTR) for your business and a National Insurance number.

HMRC will set you up and send you a letter with the information you need to start working as a Construction Industry Scheme (CIS) contractor.

Verifying subcontractors

Before you can pay a new subcontractor, you’ll need to ‘verify’ them with HM Revenue and Customs (HMRC).

HMRC will tell you:

Whether they’re registered for the Construction Industry Scheme (CIS)

What rate of deduction to use or if you can pay them without making deductions

Pay deductions to HMRC

You must pay HM Revenue and Customs (HMRC) any deductions you’ve made.

HMRC will set up a Construction Industry Scheme (CIS) payment scheme for you when you register as a contractor.

If you already have employees, HMRC will change your existing PAYE Scheme to a PAYE/CIS scheme. You should make one payment each month or quarterly to cover your PAYE tax, National Insurance and CIS deductions.

When and how to pay

Pay HMRC every month by the 22nd (or the 19th if you’re paying by post). You may be charged interest and penalties if you pay late.

Pay CIS deductions to HMRC in the same way as PAYE and National Insurance payments.

If you have any questions or queries on any of the above please

Contact Us