Working in the construction industry? Whether as a contractor, subcontractor or on a construction site? Then it’s likely you’ll fall under the Construction Industry Scheme (CIS).
Specialist CIS Accountants in Buxton & The High Peak
If you work in the construction industry, whether as a contractor, subcontractor or on a construction site as part of your day-to-day duties, the work you carry is likely to fall under the Construction Industry Scheme (CIS).
Special tax rules apply to subcontractors working in the construction industry. The Construction Industry Scheme (CIS) outlines these rules and how payments are to be processed by contractors.
CIS is paid at different rates depending on whether you are registered under the scheme, if you are registered under the scheme its likely you’ll have to pay 20%, however if you aren’t registered, you’ll have to pay 30%. There are lots of complicated rules and conditions which effects on how it works.
What is the Construction Industry Scheme?
CIS was created by HM Revenue & Customs (HMRC) to facilitate the collection of tax from construction industry workers. If you choose to operate as a CIS registered worker, it allows you to take advantages of a range of benefits.
The CIS Scheme is a system for HMRC to collect tax from independent construction workers. It allows construction workers the ability to pay the right amount of tax under a stable and secure payroll system. CIS also helps to ensure you don’t pay more tax than you should and gives you an easy and efficient method of receiving a rebate on any overpaid taxes.
All construction work carried out in the UK is covered by CIS, this could be your end client who hires you for a construction job and it can be you as an individual as well. Many construction workers prefer to set up and run their own CIS-registered limited company.
The scheme was designed to crack down on tax evasion in the construction industry, but in reality, it’s the honest subcontractors that are carrying the load. However, the news isn’t all bad, though. You can claim back the extra tax you’ve paid in your Self-Assessment tax return.
How do you become CIS registered?
Any worker who is deemed by HMRC to be working within the construction industry is required to join the Construction Industry Scheme (CIS). The method to register as a CIS worker is easy but please be aware that the procedure can take up to 8 weeks.
HMRC has a dedicated helpline that may be useful if you would like to speak to a representative about becoming CIS registered – 0300 200 3210 or by sending off form CIS301.
Do I pay tax if I’m CIS?
Yes, you will pay tax “at source”; (When you’re paid through CIS, your contractor has to chisel of 20% of your income before you get it. That money goes straight to HMRC. It’s supposed to act as “advance payment” toward the tax and National Insurance you’ll owe. Your contractor doesn’t have any choice about this; it’s just how the law works.
From a subcontractor’s point of view, though, it can be pretty painful. In effect, you’re being taxed right from the first penny you earn, without getting your tax-free Personal Allowance. The news isn’t all bad, though. You can claim back the extra tax you’ve paid in your Self-Assessment tax return, even though you’ve already had 20/30% of your money taken by HMRC, you still have to file a return. If you’ve paid too much tax, you can get a tax refund.
CIS payment and deduction certificates
A CIS Contractor must complete an Online Monthly CIS Return to HMRC, which lists the tax deducted from there Sub-Contractors. Even if no sub-contractors worked in a particular month, then a ‘nil return’ is still required. The total CIS deducted must then be paid over to HMRC each month.
There are strict rules for CIS contractors about payment and deduction statements. They need to send you one every time you’re paid, with specific deadlines to hit.
If you haven’t been receiving yours, don’t panic. It may just be a simple admin mix-up. Get in touch with your contractor and ask for your certificates, so you can keep your Self-Assessment records up to date.
Don’t just ignore the problem. If it turns out your contractor’s not been doing things correctly with HMRC, things could get awkward for you in a hurry, come the end of the tax year. If you still have no luck, contact ABS Accountancy for advice and help. We’re experts when it comes to sorting out tax problems.
Do I need to do a tax return if I’m a CIS contractor?
Subcontracting under CIS means your Self-Assessment filing has a couple of extra points to consider. If you don’t understand the system, it’s easy to end up paying a lot of extra tax you don’t owe.
Not filing those tax returns each year brings three very serious problems your way:
- You’re not getting your tax-free Personal Allowance.
- You’re not getting any of the tax relief you’re entitled to for your work expenses.
- HMRC’s going to come after you for failure to file!
With specialist experience within the building and construction industry, ABS Accountancy can assist in the specialist tax rules applied to firms operating either as a contractor or subcontractor within the construction industry scheme.
Services we provide for contractors:
- Register you with HM Revenue & Customs (HMRC) as a contractor
- Verify your subcontractors with HMRC
- Ensure you pay your subcontractors correctly within the scheme
- Supply deduction statements to the subcontractors
- Keep your records in good order and supply HMRC with monthly returns
Services we provide for subcontractors:
- Determine your status as a subcontractor or employee, (or both) and register you with HMRC accordingly
- Verify you with HMRC on behalf of your contractor
- Manage and organise your business records
- Prepare your end of year self-assessment tax return and calculate your tax liability/ refund where applicable