Do you know if your business needs to register with the Construction Industry Scheme (CIS)? There’s often some confusion about who needs to register for CIS and how to do it.
CIS is a government scheme that means you might have to deduct certain tax payments. Failing to do so can result in negative consequences, such as hefty fines.
If you’re a contractor in the construction industry, who subcontracts work to other businesses, we encourage you to read on to find out more about whether or not you need to register for the construction industry scheme.
What is the Construction Industry Scheme?
What is the Construction Industry Scheme? CIS, commonly referred to as a contractor 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 and national insurance.
If you want to know more details about the calculations, you can find the specifics on the HMRC website and log in from there if needed using your government gateway user ID.
If the subcontractor is registered with CIS, then the tax deduction rate will be 20%. However, if the subcontractor isn’t registered, then the deduction will be slightly higher, at 30%.
Registered subcontractors can apply for gross payment status, which means that no deduction will be taken, but you need to meet certain criteria to apply. The key criteria are:
- The business is continued in the UK and has a UK bank account
- The business must meet the minimum turnover limits
- The business has correctly met tax and national insurance deadlines in the past and made the correct payments
Registering for the Construction Industry Scheme
If you’re a contractor in the UK, you must register for CIS if you hire subcontractors for construction work. You must also register as a contractor with CIS if:
- You pay your subcontractors to complete construction work
- 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 need to register as a subcontractor if you complete construction work for a contractor. If you fall into both categories, you must still register for CIS. It’s important to note that you must register on CIS before you pay any employees or subcontractors.
1,206,000 construction workers were paid via CIS between the 2022–2023 tax year. CIS covers most construction work, including permanent and temporary buildings or structures, and civil engineering work such as roads and bridges. In terms of CIS, construction work often includes:
- Building work
- Preparing the site (laying down foundations)
- Demolition work or dismantling
Other forms of work that CIS includes are repairs and decorating, alterations, installing systems such as heating, power, water, and lighting), and cleaning work upon completion of construction. However, there are exceptions – you won’t need to register for the CIS if you only do certain jobs. These jobs can include:
- Carpet fitting
- Delivering materials
- Surveying
- Architecture
- Hiring scaffolding (not including labour)
- Delivering materials
You also won’t need to register for the CIS scheme if you conduct work on construction sites that isn’t actual construction. For example, running site facilities such as canteens, or cleaning operations.
How to Register
Registering for CIS is both quick and straightforward. Before completing CIS registration, you’ll need to be registered as an employer with HMRC.
This makes it easier to get your details from 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 for CIS. If you’re a subcontractor and meet the requirements for CIS, you can also register on the HMRC website.
While doing so, you’ll need to provide information about the business, including the Unique Taxpayer Reference number (UTR) that you would have received. If you have any issues throughout this process, there’s a CIS helpline available.
CIS Tax Disputes
In some cases, the Construction Industry Scheme can be difficult to understand. Failing to follow CIS tax rules can leave you with eye-watering penalties issued by HMRC. Luckily, when it comes to the CIS scheme, we’re here to help. At LJS Accounting Services, we ensure the scheme is operated correctly from the get-go.
While planning construction work, it’s important to consider the CIS tax implications. Our expert team of professionals are here to help you in this field. In addition to our CIS-related services, we offer an array of other services for clients to utilise.
Our team consists of highly trained specialists, who can help you complete your self-assessment tax return, income tax, and bookkeeping, to name a few. To find out more about our services, please get in touch today. We look forward to hearing from you.
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.
