The Construction Industry Scheme (CIS) is a government initiative that ensures that subcontractors in the construction industry meet their tax obligations. Contractors must make deductions from subcontractors pay, which will count towards their tax and national insurance. The scheme covers all types of construction work including site preparation, alterations, dismantling, construction, repairs, decorating and demolition.
In this article, we’ll answer some of your most commonly asked questions about CIS.
Is CIS Compulsory?
Registration for CIS is compulsory for contractors. Sub-contractors do not have to register, but if they don’t, deductions from their wages will be higher (30% instead of 20%). The only people working in construction who don’t need to register for CIS are employees or self-employed trades who only carry out work for private householders.
Who needs to register as a contractor for CIS?
If you pay subcontractors to do construction work you must register for CIS. This includes mainstream contractors (builders, labour agencies, gangmasters, property developers) and “deemed contractors” (businesses who don’t do construction work but have spent more than £3 million on construction in the last 12 months since you made your last payment).
Can you opt out of CIS?
As a contractor, you can only opt out if you have stopped trading or are no longer using subcontractors. As a subcontractor, you don’t have to register, but if you choose not to, tax deductions will be 30% instead of 20%.
How long does it take to apply for CIS?
Registering as a contractor for CIS can be done on the same day via the CIS helpline. For subcontractors, you must first be registered as self-employed, and then it will take a few days to complete CIS registration.
Do I need a CIS card?
You get a CIS card as a subcontractor after you’ve registered. Some contractors will only work with subcontractors who have a CIS card.
What jobs fall under CIS?
Most trades are covered under CIS including plasterers, plumbers, carpenters, electricians, builders, groundworkers and joiners. The only jobs that are exempt from CIS are architecture and surveying, scaffolding hire (with no labour), carpet fitting, delivering materials and work on construction sites that is clearly not construction (like running running a canteen or site facilities).
Can you get CIS tax back?
As a subcontractor you can claim a refund of your CIS payments if it turns out that you have paid too much tax or National Insurance. For sole traders and partners, any excess will be calculated as part of your Self-Assessment tax return. As a limited company, you must claim CIS overpayments through your company’s monthly payroll scheme. HMRC will take your CIS deductions off what you owe in PAYE tax and National Insurance, after you have filed your monthly Full Payment Submission (FPS) and Employer Payment Summary (EPS).
What happens if you don’t register for CIS?
As a contractor, if you don’t register for CIS, you won’t be able to pay your sub-contractors correctly which will result in fines and steep penalties.
MyPeople can help you stay CIS compliant with comprehensive support from registration and beyond. We can advise you through registering with HMRC as self-employed or a business entity, completing the CIS registration form, and obtaining a Unique Taxpayer Reference (UTR). This will ensure that your CIS payments are only 20%, rather than 30% for non-CIS registered sub-contractors.
Once registered, we’ll apply a small processing fee and withhold the necessary 20% tax from pay, remitting it directly to HMRC, before depositing the rest straight into your personal bank account.
MyPeople makes the CIS payroll process easy and straightforward so you can focus on your core activities. If you want to find out more about how we can help, get in touch today.