The Construction Industry Scheme is commonly known by the acronym ‘CIS’.
It affects subcontractors and contractors in the construction industry.
The Construction Industry Scheme is an HMRC tax scheme that must be used by anyone affected.
What is the Construction Industry Scheme (‘CIS’)
In essence, the Construction Industry Scheme works like this:
A contractor working within the construction industry is required to deduct a set amount of tax and national insurance from subcontractor payments. The contractor must then pay this over each month to HMRC.
Who is Affected by the CIS Tax Scheme
Under the HMRC Rules of the Scheme Contractors and Sub Contractors who carry out certain types of construction work are affected.
Construction Work Which Falls Under CIS
HMRC sets out really detailed rules as to what is considered construction work and who falls under the rules of CIS. It covers most construction work in the UK including work to:
For the purpose of CIS, construction work includes:
- preparing the site, eg laying foundations and providing access works
- demolition and dismantling
- building work
- alterations, repairs and decorating
- installing systems for heating, lighting, power, water and ventilation
- cleaning the inside of buildings after construction work
- a permanent or temporary building or structure
- civil engineering work like roads and bridges
Exceptions to CIS
You don’t have to register if you only do certain jobs, including:
- architecture and surveying
- scaffolding hire (with no labour)
- carpet fitting
- making materials used in construction including plant and machinery
- delivering materials
- work on construction sites that’s clearly not construction, eg running a canteen or site facilities
If you are unsure whether you are affected by the Construction Industry Scheme then call HMRC on 0300 200 3210 or contact a professional.
Who is a Contractor
A contractor is a business or person that pays subcontractors for work which falls into the rules of CIS.
Who is a Sub Contractor
A subcontractor is a business or person that carries out construction work for a contractor.
How Does the Construction Industry Scheme Work
Every time the contractor pays a subcontractor they are required to deduct a set amount for tax and national insurance before making the payment.
The contractor must then pay over by the 22nd of each month.
It is similar to what an Employer must do when they pay employees under the PAYE Scheme.
The amount a contractor must deduct is:
- 20% for a registered CIS subcontractor
- 30% for a non registered CIS subcontractor
- 0% is the subcontractor has gross payment status
The percentage is based on the gross amount paid to a contractor excluding:
What is the Difference Between a Registered and Non Registered Sub Contractor
A registered contractor is one who has called HMRC to register as working in the construction scheme.
They can be:
- the owner of a limited company
- a partner in a partnership or trust
Obviously, as a registered
Learn More: How to Register for CIS Online
Updated 14 April 2019
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