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CIS (Construction Industry Scheme)
What is CIS?
In the past the construction industry suffered from compliance issues (tax avoidance). As a result CIS was introduced in the UK in 1972. It has evolved over the years into its current form. CIS covers both contractors and subcontractors, and regardless of which one you are, it is vital that you are familiar with your obligations under the scheme. (If you’re not sure if you are a contractor or subcontractor, take a look at our blog When does CIS apply in the Construction industry?)
- For contractors this means that if you are employing workers as subcontractors, you are responsible for making the tax payments to HMRC.
- Subcontractors must pay tax under the Construction Industry Scheme . This applies when the sub-contractor is a third party employed by contractors to carry out work. For example, homeowners that hire a builder or similar, are not contractors.
Under the HMRC scheme, the contractor must withhold tax on payments to sub-contractors. At the rate of 20% for registered sub-contractors or 30% for non-registered sub-contractors.
The problem with this is that although tax is withheld, this can be confused with being an employee. However, it is not the same thing. Under CIS you are not an employee and crucially, you are not entitled to employment rights. (See Gov.uk for ‘worker’ status.) However, the CIS payments made by contractors contribute to the overall tax and NI for that year.
CIS covers work such as building and civil engineering, demolition, site clearing, repairs, decorating and installing power systems. The HMRC CIS manual lists what falls within the Construction Industry Scheme.
Exceptions to CIS
However, there are some clear exceptions where sub-contractors need not register under CIS. These include
- Architecture & Surveying
- Carpet Fitting
- Hiring Scaffolding (no labour included)
- Delivery of materials
- Support work on construction sites that is not construction, like canteens or site facilities
Why Choose Accurox?
At Accurox, we have worked with construction businesses for decades. Our team is fully up to speed with the intricacies of CIS and can help you and your business navigate the scheme with confidence and helping you to avoid mistakes that are commonly made.
For more information contact us now to set up a meeting.