The Construction Industry Scheme (CIS) is a government-run scheme put in place to make sure that contractors and subcontractors pay what HMRC believes is the correct amount of taxes.

This article explains how the scheme works, if you need to sign up for it, and what being a part of it will mean for your business.

How does the scheme work?

Under CIS, contractors must deduct money from a subcontractor’s payments and pass it along to HMRC. These deductions count as advanced payments towards a subcontractor’s tax and national insurance contributions.

After registering for the scheme, you will have to identify all of your subcontractors to HMRC so that they can check whether they are a part of the scheme or not. This is important because it determines the proportion of their money you withhold and then send to HMRC.

When the time comes to pay your subcontractors, you will need to make the relevant deductions from their pay. If your subcontractor is a part of the CIS, then they receive a 20% deduction. If they are not a part of the CIS, then you must deduct 30%.

Do I have to register for the Construction Industry Scheme?

The rules for registering for CIS are dependent on whether you are a contractor or a subcontractor.

Contractors must register for the scheme, subcontractors do not have to. However, as seen above, the deduction will be higher for subcontractors if they do not register.

You must register as a contractor if you either pay subcontractors for construction work or if your business or organisation is not in the business of construction but spends more than £1 million a year over a 3-year period on construction (HMRC will classify you as a “deemed contractor”). You must register as a subcontractor if you are paid to do construction work by a contractor.

If you happen to fall into both categories, then you must register as both a contractor and a subcontractor.

Which types of work are covered by the scheme?

The following types of work require CIS registration:

• Laying foundations
• Providing access works
• Site preparation
• Building work
• Demolition
• Dismantling
• Alterations
• Decorations
• Building repairs
• Heating, lighting, power, water, and ventilation system installation
• Cleaning the inside of a building after construction work

Who is exempt from CIS?

Jobs which do not require you to register for CIS are: architecture, carpet fitting, delivering materials, surveying, and scaffolding hire (where you don’t provide labour).

CIS also does not apply if you are a contractor and the work you’re doing is paid for by a charity, trust, a governing body or head teacher of a maintained school on behalf of the local council.

If you’re a subcontractor working on your own property and the work is less than £1,000 in value excluding materials. CIS also does not apply for deemed contractors working on their own property for their own use (as long as the property is not for rent or sale) or if they are paying for a construction contract worth £1,000 in value excluding materials.

CIS payments and fines

You will need to file a monthly CIS return on the 19^th of every month and pay the money over at the same time. You can file them yourself using an online tool or you can have an accountant do it for you.

If you give the wrong employment status type for a subcontractor on your monthly return, you can be fined up to £3,000. There is also an escalating series of fines for late submissions.

Work with us on CIS

By having an accountant check your CIS returns, you will avoid errors in the deductions that you take from subcontractor’s payments. Accountants will also save you time when actually filing the CIS return.

If you have any questions about CIS returns, or if you would like some advice on how best to manage your contracting taxes, call our team on 01606 333 900 or email us at hello@burtonbeavan.co.uk.