Construction Industry Scheme – Frequently Asked Questions
Below are the most common questions we receive about CIS.
What Is the CIS Tax Scheme?
This scheme is applicable to all working in the mainstream construction industry, whether they are sole traders, partnerships or limited companies.
Various types of work fall under the term ‘construction’,’ including general building jobs like bricklaying, roofing and plastering, groundwork, alterations, demolition and repairs.
Who Does this Scheme apply to?
The rules of the scheme apply to construction workers, working under a construction contract, but it does not apply to employees.
Contractors and subcontractors are required to register for the prior to any construction work starting. For a contractor, this is a fairly straightforward process which involves registering via the HMRC online service.
What Information Do I Need?
The information you’ll need to supply is fairly straightforward and includes things like the company name and contact information, date of payments, UTR and National Insurance numbers. Limited companies and partnerships will have to supply some additional information, which will be requested by HMRC when you register.
For subcontractors, most of the same information will be required to register. Contractors will need to confirm the self-employed status of the subcontractor, otherwise the scheme will not be applicable and they will be need to be paid under PAYE. The contractor will also need to confirm that the subcontractor has been verified to HMRC.
What Happens When I Am Verified?
Following the completion of the verification process with HMRC, the contractor will deduct the tax at source from payments made to the subcontractor. Any contractor will be required to provide subcontractors with a voucher or certificate which confirms which deductions were taken and must submit a return each month.
What Are CIS Deductions?
These are standard deductions a subcontractor would expect to see removed from a payment.
Can Subcontractors Do This Without Deductions?
Some subcontractors are eligible to receive their payments without deduction if they meet the qualifying criteria set out by HMRC – the business test, the turnover test and the compliance test.
What Are the Tests All About?
The business test ensures that the work is carried out in the UK and is run through a bank account.
The turnover test checks to ensure annual turnover is greater than £30,000 for individuals and sole traders, excluding the cost of materials and VAT. This figure is higher for most limited companies and partnerships.
The compliance test checks that no payments are due and no tax returns are outstanding. Minor compliance failures, such as a late payment or a Self-Assessment which has been filed late are likely to be ignored, but multiple outstanding issues may cause HMRC to revoke your payment status.