The unique CIS scheme applies to contractors and sub-contractors in mainstream construction work and it has a complicated verification process which contractors must complete to confirm whether a subcontractor should receive payments gross or net.Talk to an accountant
HM Revenue & Customs (HMRC) has a unique system of deductions which relate specifically to the Construction Industry. This is the Construction Industry Scheme (CIS) and requires contractors to make a deduction from their payment to their subcontractors and then pay that deduction direct to HMRC. Our highly experience team of tax experts will provide a fully managed service to main contractors and sub-contractors ensuring that all tax deductions are correct. Will advise you on all tax rebates and claim any outstanding tax refunds.
CIS requirements are undeniably stressful for anyone unfamiliar with their complexities. This is an area where our professional expertise can help. We have worked successfully with a wide range of clients in the construction industry and we understand the kind of pressures you work with every day.
Whether you are a main contractor or a subcontractor, we understand that you have a reputation to protect in terms of fulfilling your own clients’ building projects. In itself, this can be a major challenge with clients often changing the goalposts, budget and timeline constraints, project management and completing the project to the specifications.
Being on site in all weathers, working long hours and keeping track of all the diverse elements of a build project can often mean that day to day accounting takes second place. The construction industry is markedly different from other product and service-oriented businesses, and we can understand that you need professional accounting expertise which is knowledgeable about the vagaries of your business.
Our team of professional CIS accountants can help you with new rules for charging VAT which will affect VAT registered businesses subject to CIS from October 2020.
Awareness of and compliance with HMRC’s requirements in relation to CIS is almost a full-time job in itself for a busy contractor. If you don’t keep on top of this aspect of your business, you run the real risk of financial penalties and possibly losing your status as a Contractor.
How can we help?
We can help you every step of the way. Our CIS team will help with ensuring:
Are you a main contractor in the construction industry?
A business which includes carrying out ‘construction operations’ is defined as a contractor, whereas a subcontractor is someone who carries out work on behalf of the contractor. It is actually possible to be both a contractor and a subcontractor.
Under the Construction Industry Scheme, you are regarded as a main contractor if you employ subcontractors. As a main contractor, you are legally required to register with HMRC and to complete the approved verification of your subcontractors.
In introducing the Construction Industry Scheme, the objective of HMRC is to ensure self-employed subcontractors are paying the correct amount of tax.
Verifying your subcontractor
Before a contractor can make a payment to a subcontractor for construction work, you need to check with HMRC that the subcontractor is registered.
The contractor will then be informed whether or not the subcontractor is registered, and will be told the amount to deduct from the subcontractor’s payment, or none, if that is the case.
Payments to subcontractors
Once the subcontractor’s verification has been completed, the main contractor should deduct 20% for tax purposes, from the subcontractor’s gross fees. However, if the subcontractor hasn’t registered with HMRC, meaning that verification is not possible, then this deduction would be 30%. This of course is a great encouragement for subcontractors to get themselves registered with HMRC.
Monthly Payment Statement
Every month, the main contractor needs to send a statement to HMRC setting out the amounts they have deducted from each subcontractor. This is a strict requirement and must be done within 14 days of the end of the month when the subcontractor was paid, and there are penalties for filing late returns.
As a subcontractor, you also have a complicated administrative burden. We can take the stress away by dealing with your HMRC registration and liaising with your main contractor to verify your status.
The most important consideration for you as a subcontractor is to ensure you register your status with HMRC.
Each month your main contractor employer will deduct advance payments from your wages for tax and National Insurance.
Your contractor’s deductions will be 20% if you are registered with HMRC, but 30% if you are not registered, so this is a real incentive to make sure you are properly registered.
Our expert CIS accountants will ensure you are paying the correct tax in relation to CIS and, if you wish, on your behalf we can apply to HMRC to change your tax payments to ‘gross payment’ status. This means that you won’t have tax deducted from your monthly payment from the main contractor, but that you will be liable to pay your outstanding tax at the end of the tax year.
We can prepare your self-assessment tax return to make sure all of your calculations are accurate and that any penalties are avoided, and that you receive any tax refunds you are due.