The Construction Industry Scheme (CIS) is administered by HM Revenue & Customs (HMRC). It regulates payments from contractors to subcontractors in the building industry.
How CIS works
All building contractors and subcontractors should register with the scheme.
Who is a CIS contractor? – Anyone who uses subcontractors for construction work needs to register as a CIS contractor with HMRC.
Who is a CIS subcontractor? – You’re a CIS subcontractor if you’re self-employed or a company and agree to do construction work for a contractor. You should register with CIS.
If you’re a contractor and subcontractor, you must register as both.
Work covered by CIS
As a general rule, the Construction Industry Scheme (CIS) includes almost any work that is done:
- to a permanent building.
- to a temporary structure (eg scaffolding).
- in civil engineering (eg bridges).
Some of the types of work covered by the scheme include jobs like:
- site preparation.
- general construction – bricklaying, roofing, plastering and so on.
- alterations and extensions.
- repairs and refurbishment.
- dismantling work.
Contractor monthly returns and record keeping under CIS
As a contractor under CIS you will need to make monthly returns each month. Doing this online is quick and easy. If you make any mistakes HMRC can help you sort them out.
Before you verify a subcontractor it is important to make sure that the contract is not one of employment. If the contract’s a ‘contract of employment’ then they’re an employee and in PAYE not CIS.
When paying a subcontractor you will need to ‘verify’ them with HMRC to check that they are registered under CIS and what their payment status is. Subcontractors can be verified using HMRC’s CIS online services or calling HMRC’s CIS Helpline.
You will need the following information about the subcontractor:
- Name, or the name of their business or company.
- Company registration number or National Insurance number if self-employed.
HMRC will check to confirm whether the subcontractor’s registered, tell you how to pay them and give you a verification reference number. You’ll get a slightly different type of reference number if HMRC can’t verify the subcontractor’s registered with them. It’s important you keep a note of it.
When HMRC verify a subcontractor, they’ll tell you how to pay them. This could be:
- Gross – meaning you don’t make any deductions
- Standard rate – making deductions at 20%.
- Higher rate – making deductions at 30%, because the subcontractor isn’t registered or couldn’t be verified for some other reason.
If you don’t need to verify a subcontractor if you’ve included them on a previous CIS return. HMRC will let you know if they change a subcontractor’s payment status.
If you would like to discuss this of anything else please book a call back to chat about your business here.