Working as a CIS Subcontractor

Construction_TaxAgility Accountants London The Construction Industry Scheme (CIS), a scheme overseen by HMRC, creates and governs the rules for how subcontractors performing construction work should be paid by their contractors.

Though the scheme was developed with mainstream contractors and subcontractors in mind, it’s since been adopted by large companies and organisations spending a significant annual sum on construction costs that can, therefore, also be deemed to be contractors.

If you’re working as a subcontractor in the construction industry, and you believe there’s a chance you may be deemed as such under CIS, HMRC have produced a simple guide to instantly determine your status.

If you do fall under CIS, speak with your accountant to determine whether you should…

Register With CIS

Once you’ve determined that your activities deem your work to fall under those discussed by the Construction Industry Scheme, you should register by calling the CIS helpline on 0300 200 3210 (weekdays, 8:00-20:00), ensuring you have the business name you wish to register under handy, alongside your business’s unique taxpayer reference number (UTR), and your National Insurance (NI) number.

Once registered, your contractor will make CIS deductions from their payments to you, less the cost of the materials you supplied. Your CIS payments are part of your tax and NI payments (see below), but it’s essential that you keep accurate records of your spending and payments, as these figures are needed when completing tax returns.

If you’re a limited company, however, you can immediately start offsetting your CIS deductions against your monthly tax and NI Contributions. The rules for limited companies are more complicated than for sole traders and partnerships. For an accurate picture of what’s required from you, in your personal situation, speak with your accountant.

Apply for Gross Payment Status

Once you’ve registered for CIS you can apply for gross payment status, so long as:

Your business does construction work (or provides the labour) in this country,
This work goes through a UK business bank account,
Your turnover for the last year, less VAT and material costs, was at least £30,000 for sole traders, or £30,000 per partner or director for partnerships and limited companies,
You pay your income tax and National Insurance Contributions (NICs) on time.

The advantages of having gross payment status under CIS is your contractor will now pay you in full, meaning it’s now down to you to complete your tax and NI payments. This is beneficial as you’ll be able to personally offset some of these payments against material costs and other business expenses at the end of each tax year.

It should be noted that HMRC review your gross payment status every year, and are quick to revoke it should you no longer qualify, you’re late with your payments, or you supply too many accounting errors.

In the past year alone, over 2,300 contractors in the construction industry have had their gross payment status revoked. If you’re currently completing your own accounts, consider hiring an accountant to sharply reduce your chances of submitting incorrect accounts.

Report Changes

Finally, it’s essential that you submit any significant changes in your business status (such as your business changing from a partnership to a limited company, or a change of address) to HMRC the moment they happen, as these changes may require you to reregister for CIS and reapply for your gross payment status.