Contractors must legally register for the Construction Industry Scheme ( CIS ). The scheme means that contractors deduct money from a subcontractor’s payments and pass it to the HMRC. These deductions count as advance payments towards the subcontractor’s tax and National Insurance.
However, there are some exemptions and reliefs that can apply to paying CIS and as always, we’re here to help you save money whenever and wherever possible.
Who has to pay CIS?
Whether you’re a sole trader, in a partnership or own a limited company, you must register as a contractor with the Construction Industry Scheme (CIS) if you pay subcontractors to carry out construction work. Even if you’re not in the construction industry, if you’ve spent more than £3 million on construction in the 12 months since you made your first payment, then you still have to register.
Who is exempt from HMRC CIS?
You don’t have to register as a contractor with the CIS is the work you’re carrying out is:
- paid for by a charity or trust
- paid for by a governing body or by the head teacher of a school acting behalf of the local education authority
- on the subcontractor’s own property if the work costs less than £1,000 excluding materials. However, you must call the CIS helpline to get an exemption.
- On a property not for sale or rent and for your own business use
The type of work being carried out also affects whether you’re exempt, for example:
- architecture and surveying
- scaffolding hire (labour not included)
- Carpet fitting
- Delivery of materials
- A canteen or other site facilities on a construction site that aren’t classed as construction themselves.
How to pay CIS
Companies required to pay CIS must deduct a percentage of the payment from the subcontractor and pay that to HMRC (HM Revenue and Customs). This is called deduction at source.
The Construction Industry Scheme (CIS) deduction rates are:
- 20% for registered subcontractors
- 30% for unregistered subcontractors
- 0% if the subcontractor has ‘gross payment’ status – for example they do not have deductions made
Construction CIS payments to HMRC can be made online, by post or over the phone.
Construction companies that don’t pay the CIS due are liable to penalties. So, it’s important to make sure you’re paying CIS correctly to avoid the headache of hefty fines.
If you’re not sure if you should be paying CIS or how to pay the tax, contact HMRC.
Here are some other factors to think about with CIS taxes:
- The CIS rules are complex so, if you’re unsure about anything, seek professional advice.
- HMRC has the authority to conduct checks to make sure you’re paying CIS correctly.
- And don’t forget, if they find you are non-compliant with CIS, you may be liable to penalties.
By checking the eligibility criteria and following the CIS rules, you can make sure you’re paying the correct amount of tax to HMRC to avoid any risk of penalties. As tax and accountancy specialists, we’re here to help you understand CIS and register for the scheme. We can manage your CIS payments and make sure your construction projects are fully compliant and give you peace of mind that you’re crossing the t’s and dotting the i’s when it comes to tax.