What is the Construction Industry Scheme (CIS)?
The Construction Industry Scheme has been set up by HMRC to ensure subcontractors cannot evade tax within the UK construction industry and to protect them from false employment. Under the scheme, registered contractors deduct money from the subcontractor’s payments.
This then goes directly to HMRC as advance payment towards the subcontractor’s National Insurance and tax. It’s important to get it right and there are fines for late processing and late payments.
Who has to register for CIS?
HMRC states you must register as a contractor with the CIS if you pay subcontractors to carry out construction work for you or if you have spent more than £3 million on construction work in 12 months since you made your first payment (even if your business is not construction based)
It covers everyone – sole trader, partnership or limited company. You have to register for CIS before you employ your first subcontractor.
Depending on the nature of your business, you may subcontract your services as well as employ the services of others. If that’s the case, you should register as both a contractor and subcontractor and follow the relevant rules and processes. This means you will have withheld and deducted submission to make.
This is why so many turn to an accountant to make fast work of CIS invoices and deduction statements and submissions to HMRC. Moorgate team of CIS and payroll experts are here to help you.
What Industries does CIS cover?
HMRC defines construction work as:
• a permanent or temporary building or structure
• civil engineering work like roads and bridges
For the purposes of the CIS scheme, HMRC also includes:
• preparing the site – for example, laying foundations and providing access works
• demolition and dismantling
• building work
• alterations, repairs and decorating
• installing systems for heating, lighting, power, water and ventilation
• cleaning the inside of buildings after construction work
What are contractors’ responsibilities?
As a registered contractor you must verify your subcontractor is registered via HMRC – this will then enable HMRC to confirm the rate of deduction. If a deduction is applicable, the contractor will need to calculate the amount to be deducted, make the net payment to the subcontractor, record full details and provide a deduction statement to the subcontractor.
Each month, contractors are also responsible for sending HMRC CIS returns. These detail the subcontractors they’ve worked with, outline the payments made and disclose any and all deductions. This statement must also confirm that the employment status of the subcontractors has been considered and that all subcontractors have been properly verified.
Each month, contractors have to send on their CIS payments for the deductions they have made.
Can you claim CIS back?
You may be able to claim a refund if you have bought materials or incurred expenses for the job (such as tool hire). CIS does not take into account your Personal Allowance either – that’s the amount of earnings UK taxpayers are eligible to receive tax-free and this may impact any claims.
How Does an Accountant Help with CIS?
At Moorgate, we have a tram of CIS specialists to help you navigate the complicated CIS submissions and record keeping legislation. We are experts in withheld and suffered rates and can gain full agent status with HMRC to enable us to have full access to your CIS account online. We can register you for CIS with HMRC, authorise subcontractors, prepare and submit monthly returns, issue certificates and deal with overpayments, underpayments and claims.
Contact the payroll team for more information :
Tel: 01883 730044 or email jo@moorgates.co.uk or maria@moorgates.co.uk
Our Payroll Managers would be happy to talk to you about your CIS requirements.