CIS – not be be confused with CSI!

March 1, 2022

If you’re in the construction industry, then this one’s for you.

Put those tools down, sit up and take notes 😊

We have some information on CIS, not to be confused with CSI.

If you’re a contractor in the construction industry, you need to be aware of your obligations under the Government’s Construction Industry Scheme (CIS). CIS is essentially, a scheme a little like PAYE and requires contractors to withhold 20 or 30 percent of any payment due to a subcontractor and pay the deduction to HMRC. Contractors must register however subcontractors don’t have to register, but deductions are taken from subcontractors payments at the higher rate of 30 percent if they’re not registered. That’s it in a nutshell, however you do need to be aware that you need to verify that a subcontractor is genuinely self-employed and shouldn’t be treated as an employee of your business for tax purposes. We don’t want to upset HMRC by getting that wrong! Just to be sure we’ll take the headache away and guide you through the process. Registered contractors can use this link https://www.gov.uk/what-is-the-construction-industry-scheme to make monthly returns or to check if a subcontractor is registered.

The scheme is useful for your subcontractors as they get to spread their tax liabilities over the financial year so you will be keeping those vital subcontractors happy 😊 Just a note of advice to your subcontractors that under the new system they must show, but no longer charge, the correct rate of VAT on their invoices to contractors from 1st March 2021. Instead, the contractor must account for the VAT to HMRC. All deductions must be included on a monthly return to HMRC. Please keep full accurate records of all CIS payments and deductions to avoid penalties.

We all know that it can be time consuming for business owners to calculate wages when it comes to pay day and nobody wants to be late with payments to reliable contractors, staff or with payments to HMRC so if you’re unsure about what rate to use, how to calculate deductions or how to record tax deducted of course I’m always here to help.