The Construction Industry Scheme (CIS) is a government initiative that has been designed to help contractors and subcontractors pay the right amount of tax to HM Revenue and Customs (HMRC). It’s applied to lots of different types of construction work that’s carried out in the UK and can apply to companies of various sizes and turnover.
If you’re a construction business then you must register as a contractor with the Construction Industry Scheme ( CIS ) if you pay subcontractors to do construction work or if you’ve spent more than £3 million on construction in the 12 months, even if they’re not in the construction industry.
Whether you’re a sole trader, in a partnership or own a limited company, the rules above still apply but if you’re not sure if you need to register, take a look at the Gov.uk’s list of who’s covered by CIS.
They also set out some rules you must follow including:
- “You must register for CIS before you take on your first subcontractor.
- You must check if you should employ the person instead of subcontracting the work. You may get a penalty if they should be an employee instead.
- Check with HM Revenue and Customs (HMRC) that your subcontractors are registered with CIS.
- When you pay subcontractors, you’ll usually need to make deductions from their payments and pay the money to HMRC. Deductions count as advance payments towards the subcontractor’s tax and National Insurance bill.
- You’ll need to file monthly returns and keep full CIS records – you may get a penalty if you do not.
- You must let HMRC know about any changes to your business.”
Beyond staying on the right side of the HMRC, there are several benefits to being CIS registered, including:
- Peace of mind. As a CIS registered contractor, you can be confident you’re paying the right amount of tax and are not at risk of being investigated by HMRC.
- Reduced risk of fraud. The CIS scheme helps to reduce the risk of fraud in the construction industry. It does this by making sure contractors are properly vetted and that payments are made via a secure payment system.
- Improved cash flow. CIS can help to improve your cash flow by making sure payments are made in full and on time.
- Increased opportunities. Contractors that are CIS-registered can be more likely to be considered for hire by major contractors as it shows a commitment to compliance.
If you’re a contractor working in the construction industry, we’d always recommend becoming a registered member of CIS. It’s a simple process to join with lots of rewards to reap.
How to register for CIS
To register for CIS, you’ll need to give HMRC some basic information about you, your business and your tax reference number. You can register via the phone or post, as well as online.
Once you’ve registered, you will receive your own unique CIS registration number, which must be added to all the invoices you send to contractors.
Here to help
Are you a contractor in the construction industry? Have you registered for CIS? If you need help navigating the process then we’re here to help you make the most of the benefits that come with it from reduced risk of fraud, better cash flow, more opportunities and, of course, peace of mind that everything is as it should be.