Do you know if your business needs to register with CIS (the construction industry scheme)? There’s been plenty of confusion about who exactly needs to register for CIS, and how you register.
The construction industry scheme is a government scheme that means you may have to deduct certain tax payments - and failing to do so can result in hefty fines.
If you’re a contractor in the construction industry and you subcontract work to other businesses, then this article is for you.
Keep reading to learn whether you need to register for the construction industry scheme, and how exactly you register.
CIS (the construction industry scheme) is a form of tax for contractors that subcontract work to other businesses.
It means that money is deducted from payments to subcontractors and given to HMRC.
The deduction applies to the labour of invoices, rather than materials and VAT. It counts as an advance payment towards your subcontractor’s tax as well as national insurance.
If you want to know more details of the calculations, you can find the specifics on the HMRC website.
If the subcontractor is registered with the construction industry scheme, then the deduction will be twenty per cent.
However, if the subcontractor isn’t registered, then the deduction will be slightly higher, at thirty per cent.
Registered subcontractors can apply for gross payment status, which means that no deduction will be taken. However, you must meet certain criteria to apply.
One of the criteria is that the business is continued in the UK, and has a UK bank account.
Another requirement is that the business has correctly met tax and national insurance deadlines in the past, and made the correct payments.
The final requirement is that the business must meet the minimum turnover limits found on the HMRC website.
If you’re a contractor you must register if you hire subcontractors for construction work.
However, you must also register as a contractor if your business doesn’t complete construction work, but has spent over £3 million on construction in the last year since you made your first payment.
You must register as a subcontractor if you complete construction work for a contractor. If you fall under both categories, you must still register onto the construction industry scheme.
It’s important that you register onto CIS before you pay any employees or subcontractors.
The construction industry scheme covers most construction work, including a permanent or temporary building or structure, and civil engineering work such as roads and bridges.
In terms of CIS, construction work may include building work, preparing the site (e.g laying down foundations), demolition work or dismantling.
Some other forms of work that CIS includes are repairs and decorating, alterations, installing certain systems (e.g heating, power, water, and lighting), as well as cleaning work upon completion of construction.
However, there are exceptions. You won’t need to register for the construction industry scheme if you only do certain jobs.
These jobs can include carpet fitting, delivering materials, surveying, architecture, hiring scaffolding (not including labour), delivering materials.
You won’t need to register for CIS if you conduct work on construction sites that isn’t actual construction, for example, running site facilities such as canteens, or cleaning operations.
To double-check if you need to register onto the construction industry scheme, or to learn more about the deductions, you can find more information on the HMRC website.
The good news is that it’s a quick and easy process registering onto the construction industry scheme.
Before you register with CIS, you must be registered as an employer with HMRC, so your details are on the system.
If you’re not already registered as an employer with HMRC, you can do so online through the HMRC website.
Once you’ve registered as an employer, you’ll receive a PAYE Employer Reference and an Accounts Office Reference. You’ll need these references to register onto the construction industry scheme.
If you’re a subcontractor and meet the requirements for CIS, you can also register on the HMRC website.
You need to provide information about the business, including the Unique Taxpayer Reference number.