Construction Industry Scheme
CIS Compliance | VAT
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The Construction Industry Scheme, commonly referred to as CIS, is a scheme where self-employed subcontractors in the construction industry have payments taken from their fees by the contractor, who then pays them to HMRC. Most contractors require subcontractors to be part of this scheme, particularly on large construction projects. As a subcontractor, you will already be registered as self-employed and will need to register with HMRC to obtain a certificate and registration card.
While most construction activities are included in the scheme, some are not, mostly because they fall under other business categories for taxation purposes. Speaking to one of our competent accountants will bring savings outside of simply reducing the deductions that main contractors take off. You will also be able to get the advice required to claim expenses and other aspects of self-employed tax.
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Construction Industry Scheme was introduced in 1971, and its a tax deduction system for self-employed construction workers and business contractors working in the construction industry.
Any tradesman or business working in the construction industry is treated as a contractor. Tax is deducted from their gross payments under CIS and then deposited and reported to HMRC.
For taxpayers registered under CIS, 20% tax is deducted on the gross amount. Contractors who are not registered for CIS will see a deduction of 30% on their gross value of the invoice.
Self-employed contractors with a turnover of £30.000 and limited companies and partnerships with £100,000 can apply for exemption of tax deduction under CIS, if approved business is paid gross without any tax deduction.
You can calculate your income and check if a refund is due. Your taxable income will be after deducting your expenses and yearly personal allowance. For a quick refund calculation, call our office for advice and a quote.
You can offset CIS tax against PAYE as an employer, VAT or corporation tax. You would need to inform HMRC about the adjustment you are trying to make.
You must pay HMRC every month by the 22nd (or the 19th if you’re paying by post). You may be charged interest and penalties if you pay late.
If you want to register as a contractor, it is different from registering as a sub contractor. You need to register as an employer and then apply for CIS registration.