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Anyone contracting in the construction sector, whether you’re hiring or subcontracting, will need to know about the Construction Industry Scheme (CIS).
There are elements of CIS that can be confusing to those who are unfamiliar with it, so here we take a look at what you need to know as a self-employed professional working in the construction industry.
CIS is a tax deduction scheme designed to reduce levels of fraud and tax evasion within the construction sector.
It works by taking a certain percentage of a subcontractor’s earnings upfront, which then goes toward their tax and National Insurance (NI) – this can also be handy for the subcontractor as it helps to spread their tax liabilities over the financial year.
These advanced payments are taken by the contractor who will then pay them onto HMRC.
A contractor must register for the scheme.
A subcontractor doesn’t have to register, but in not doing so, the deductions taken from their pay are set at a higher rate.
There are three different CIS tax rates:
There are certain requirements to qualify for gross payment, for example, proving that a business is up-to-date with all tax liabilities and filings and passing a 12-month turnover test.
There may be certain situations whereby it would be mandatory for a subcontractor to register, and that would be if you were also a sole trader, the owner of a limited company or a partner in a partnership or trust.
If you’re unsure whether you fall under a contractor or subcontractor status:
A contractor:
A sub-contractor:
It is possible to fall under both categories, in which case you’d need to register as both.
If you are a contractor, then you’ll have certain duties that you’ll need to carry out, such as:
CIS covers most construction work that involves a permanent or temporary building or structure, as well as civil engineering work, such as roads and bridges.
Other examples include:
You won’t need to register for CIS if you:
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IPSE provides you with all the advice and guidance required to ease the burden of tax, delivered by knowledgeable and friendly taxation experts at Markel.
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With years of experience, Dolan Accountancy provides just about everything you need in an accountancy company, all wrapped up in one low-fixed monthly fee.
Award-winning, Dolan Accountancy offers a combination of experience and great service and is both fully FCSA accredited and an APSCo Trusted Partner.
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