Construction Industry Scheme (CIS)

Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments and pass it to HMRC.

Under the CIS, deductions are made and passed on to HM Revenue and Customs, counting as advanced payments towards the subcontractor’s tax and National Insurance.

It is the contractor’s responsibility to register for the scheme, as they pay subcontractors for construction work, making them a ‘mainstream contractor’. This applies to builders, labour agencies, gang masters/leaders and property developers. If more than £1M a year is spent on construction in any three year period, then they count as a ‘deemed contractor’. Examples of this are housing associations, ALMOs, local authorities and government departments.

In order to avoid penalties, contractors must check if the person should be an employee as opposed to subcontracting the work. A full CIS record must be kept, and monthly returns must be filed to avoid penalties. Any changes to the business must be reported to HMRC.

Subcontractors do not have to register, but deductions are taken from their payments at a higher rate if they’re not registered.

CIS covers most construction work, to buildings, including site preparation, decorating and refurbishment. Registration is not necessary for architecture and surveying, scaffolding hire (with no labour), carpet fitting, delivering materials or work on construction sites that is clearly not construction, for example running a canteen or site facilities.

Other exceptions for contractors where CIS doesn’t apply is if a company is paid by a charity or trust, paid for by a governing body or head teacher of a maintained school on behalf of the local education authority, or on the subcontractors own property and worth less than £1000 excluding materials.

CIS covers construction work done in the UK and applies whether you’re based in the UK or abroad. For those based outside the UK doing construction work, a different registration process is followed.

The post Construction Industry Scheme (CIS) appeared first on UK Construction Online.