What is CIS?
Introduced by HMRC to reduce tax evasion, The Construction Industry Scheme (CIS) is a set of rules and regulations that apply to contractors and subcontractors who work in the construction industry.
How does the Construction Industry Scheme (CIS) work?
Under the CIS, contractors must register with HMRC and verify the employment status of any subcontractors they use. Subcontractors must also register with HMRC and provide their payment details. Contractors must deduct a percentage of the payment due to the subcontractor and pay it to HMRC as an advance payment towards the subcontractor’s tax and National Insurance contributions.
The percentage that the contractor must deduct depends on the employment status of the subcontractor. If the subcontractor is registered as self-employed with HMRC, the contractor must deduct 20% from the payment due. If the subcontractor is registered for the CIS and has a UTR (Unique Taxpayer Reference) number, the contractor must deduct 30%. If the subcontractor is not registered for the CIS, the contractor must deduct 30% from the payment due.
Subcontractors can claim back any excess deductions from HMRC at the end of the tax year or have the excess offset against their tax and National Insurance contributions.
Who does the Construction Industry Scheme (CIS) apply to?
The CIS applies to all construction work, including building, civil engineering, and plant installation. It also covers activities such as site preparation, decorating, and demolition. However, certain activities, such as architecture and surveying, are not covered by the scheme.
Overall, the CIS is designed to help ensure that all parties involved in construction work are paying the correct amount of Tax and National Insurance contributions, and to prevent tax evasion in the construction industry.
What can Glow Accounts do for you?
If you are a Contractor
- Verify subcontractors – we can verify any subcontractors you have working for you to determine of you need to include them in your CIS submission and what deductions are needed for them.
- Deduct CIS from subcontractor invoices – we can keep track of all work your subcontractors do for you, and deduct the relevant CIS from their invoices, so you pay the correct amount to the subcontractor and the correct tax to HMRC.
- Submit CIS – we can keep a record of all payments made to subcontractors and by the 19th of every month, we will submit the CIS report for the previous month to HMRC.
If you are a Subcontractor
- Invoice contractors – we can raise invoices to your contractors, deducting the correct amount of CIS tax.
- Pay tax to HMRC – we can help ensure you pay the correct amount of tax to HMRC after the CIS deductions are taken from your payments.
- Apply for ‘gross payment status’ – if desired, we can help you apply for ‘gross payment status’, meaning that there will be no CIS deduction and tax will be paid alternatively.
Registering for CIS
It is important to note that the process for registering for the CIS may vary depending on your specific circumstances. If you have any questions or need assistance with the registration process, you can contact us at Glow for further guidance.
To register for the Construction Industry Scheme in the United Kingdom, you will need to follow these steps:
- Determine whether you need to register: If you work in the construction industry as a contractor or subcontractor, you will likely need to register for the CIS. You can find out more about who needs to register on the HM Revenue and Customs (HMRC) website.
- Obtain your Unique Taxpayer Reference (UTR) number: If you are not already registered with HMRC, you will need to obtain a UTR number. You can register for a UTR number online or by contacting HMRC.
- Register for the CIS: Once you have your UTR number, you can register for the CIS online through the HMRC website or by contacting HMRC. You will need to provide your business name, address, contact details, and UTR number.
