CIS - Short for Construction Industry Scheme was set up by HMRC in 1971 to prevent construction workers avoiding paying their taxes. Deductions are made by the contractor either at 0%, 20% or 30% and paid over to HMRC on a monthly basis.
Can I be a Contractor and a Subcontractor?
Yes, you can. You are the contractor if you have been granted the job and have instructed subbies to enable you to complete it but you can also be the subcontractor if you have been given the job by another contractor - They pay you and you pay your subcontractors.
Why are there different rates of deductions?
0% means that the subcontractor has applied to HMRC to be 'gross status' - no deductions are to made from their payment.
20% is standard. Subbies with a UTR who have told HMRC they are working under CIS will normally have 20% deducted.
30% means higher rate. Usually subbies who haven't told HMRC they are working under CIS will be on the higher rate.
What will happen if I don't make any deductions from subcontractors?
Contractors who do not verify subcontractors before making payments or who choose not to make any deductions can face a fine of £3,000. Failures to report the deductions on a CIS return each month will face £100 automatic penalty even if its 1 day late.
How do I know if I fall under CIS?
Most Construction activities will be covered under CIS these include:
Preparation of a site; for example laying foundations, providing access, roads etc.
Demolition and dismantling including temporary and permanent structures.
Building work including lighting, heating, power & water trades as well as civil engineering and ventilation systems.
Repairs and Alterations such as decorating, roofing, tiling etc.
How can I get this right for my subcontractors?
Get in contact with us at CIS Contracts Ltd, we're real people offering real solutions & we strive to make things easier for our loyal customers. Think of us as part of the team that makes your business great.