Construction Industry Scheme (CIS)

What falls within CIS?

CIS covers most construction work to:

  • a permanent or temporary building or structure
  • civil engineering work like roads and bridges

For the purpose of CIS, construction work includes:

  • preparing the site, eg laying foundations and providing access works
  • demolition and dismantling
  • building work
  • alterations, repairs and decorating
  • installing systems for heating, lighting, power, water and ventilation
  • cleaning the inside of buildings after construction work

There are some exceptions to registration which can be viewed on the HMRC website.

What are the implications of being in CIS?

Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments and pass it to HM Revenue and Customs (HMRC).

The deductions count as advance payments towards the subcontractor’s tax and National Insurance.

Contractors must register for the scheme. Subcontractors don’t have to register, but deductions are taken from their payments at a higher rate if they’re not registered.

Who counts as a contractor or subcontractor?

Register as a contractor if either:

  • you pay subcontractors for construction work
  • your business doesn’t do construction work but you spend an average of more than £1 million a year on construction in any 3-year period

Register as a subcontractor if you do construction work for a contractor.

Verify subcontractors

Before you can pay a new subcontractor, you’ll need to ‘verify’ them with HM Revenue and Customs (HMRC).

HMRC will tell you:

  • whether they’re registered for the Construction Industry Scheme (CIS)
  • what rate of deduction to use or if you can pay them without making deductions

You must also verify subcontractors you’ve used before if you have not included them on a CIS return in the current or last 2 tax years.

The Construction Industry Scheme (CIS) deduction rates are:

  • 20% for registered subcontractors
  • 30% for unregistered subcontractors
  • 0% if the subcontractor has ‘gross payment’ status – for example they do not have deductions made

You must pay these deductions to HMRC every month by the 22nd (or the 19th if you’re paying by post). You may be charged interest and penalties if you pay late. They count as advance payments towards the subcontractor’s tax and National Insurance bill.

File your monthly returns

You must tell HM Revenue and Customs (HMRC) each month about payments you’ve made to subcontractors through your monthly return.

To find out more about CIS have a chat with one of our team.

An accounting expert from Treetops can call you back at a time that suits you.

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