Construction tax is designed to help increase revenue collected from the construction industry. This is also known as CIS (The Construction Industry Scheme).
Most construction activity is covered if you are part of the CIS, this includes:
- Preparation of the site.
- Dismantling and demolition on site.
- General building work.
- Repairs, alterations and decorating services.
- Installing various systems such as ventilation, lighting, power, water and heating.
Read on for our guide to tax in construction – including whether you need to apply, what happens if you don’t register for CIS, and how we can help you.
CIS: Do You Need To Apply?
Ultimately, yes, unless you’re exempt. As a contractor, you definitely need to register for The Construction Industry Scheme.
Additionally, as a contractor, you will be responsible for deducting the correct amount of money from subcontractors for HMRC. Alternatively, you can get an accountant.
By law, you must register for CIS before you take on your first subcontractor. If you fail to register for CIS before taking on a subcontractor, you may face some consequences.
What Happens If You Fail To Register For CIS?
A higher tax deduction is the immediate consequence. An extra 30% will be requested to be paid, but that’s not the only consequence you will face.
Tax returns will still need to be completed if you fail to register for CIS, and failure to submit tax returns will lead to fines and estimated tax bills.
Subcontractors don’t need to apply for CIS, as they should rely on their contractor to register them. Unfortunately, this could be detrimental to the subcontractor’s income if their contractor fails to do so.
In conclusion, failing to register for CIS as a contractor can have detrimental effects on your business and you could possibly face a fine of up to £3,000.
Could My Business Be Exempt?
The only time that you’re able to get away with not registering for CIS, is if your work is paid for by a charity or trust.
However, CIS doesn’t apply to any survey or architecture work and doesn’t cover the hire of scaffolding without labour, fitting carpets or delivering materials to a site – making them exempt.
Some other additional work that is exempt from CIS include:
- Running on-site facilities such as catering services, offices, medical centres and toilets.
- Delivery of road-making materials.
- Manufacture and delivery of prefabricated site facilities.
- Manufacture of offsite equipment, materials and machinery such as beams, panels, ready-mixed concrete and other general materials.
- Replacement of telecommunication or computer wiring through ducting in buildings.
Additional CIS Information
If you’re no longer trading as a contractor, you are required to ring the CIS helpline as soon as possible in order to be unregistered.
For those who are registered and intend to keep it that way, you’ll be happy to know that you don’t need to re-apply for CIS each year and there’s no expiry date.
This means that the only time you will need to reach out to the scheme helpline is when you want to stop your role as a contractor.
How LJS Could Help You
At LJS, we have vast experience working within the construction industry and our experienced accountants have worked with various construction clients, giving us specialist knowledge.
Due to our extensive knowledge, we can efficiently work alongside different clients, whether it be contractors, surveyors or developers. We can assure you that we have all the advice you need.
Accounting
If you’re a start-up business, don’t hesitate to get in touch with us here at LJS, it can be daunting setting up a new venture alone, and we don’t expect you to know everything.
We will be able to help aid your business and make sure it survives both successfully and financially, through the tough periods of business.
We aim to help take the stress away when it comes to the side of accountants and other services, such as tax and VAT. Things can become stressful if you fail to have a dedicated accountant to help you take care of your finances.
We offer accounting services, specific to the construction industry but can also additionally help with bookkeeping, projections and end-of-year accounts.
Let us deal with everything for you, so you can have more time to deal with other aspects of your business.
Keli Evans, Director at LJS Accounting Services, excels in taxation and statutory accounts. With a focus on strong client relationships, she leads a diverse portfolio, overseeing vital financial aspects like VAT, payroll, pensions, and taxation with a holistic and committed approach.
