What is CIS?
The Construction Industry Scheme (CIS) is an HMRC initiative to reduce tax evasion in the construction industry while also safeguarding workers from bogus jobs.
The CIS allows contractors to take money from a subcontractor’s wage payment and submit it to HMRC. Advance payments for national insurance and subcontractor’s tax are considered deductions.
CIS payroll can be handled in-house by a contractor or outsourced to a firm specializing in this type of payroll. Contractors who pay their subcontractors take CIS payments concurrently with the rest of their payroll. Any CIS deductions are paid to HMRC. The amount paid to subcontractors is then reported on a return.
It is feasible for an employer to be both a PAYE and CIS registered contractor.
Who is CIS for?
Most building construction activity, including site preparation, decorating, and restoration, is covered under the Construction Industry Scheme (CIS).
- Contractors who work in the mainstream
If your company is construction, you’re a ‘mainstream’ contractor, and you pay subcontractors for construction jobs. This is true if you’re a: property developer, laborer, or labor agency.
- Contractors who are regarded as deemed
If your company does not conduct construction work but has spent more than £3 million on construction in the 12 months following your first payment, you are considered a deemed contractor. This might apply to the following: Local governments, government departments, housing associations, or arm’s length management organizations (ALMOs)
Who does CIS NOT cover?
- If you operate in the following fields, CIS does not apply to you:
On behalf of the local education authority, paid for by a governing body or the head teacher of a maintained school on the subcontractor’s property and costing less than £1,000 excluding supplies – you must phone the CIS hotline to request an exemption.
- If you’re a considered contractor, CIS doesn’t apply to you if you’re paying for:
Property maintenance (that is not for sale or rent) Use a construction contract for less than £1,000, excluding materials, for your own business – you’ll need to phone the CIS hotline to request an exemption.
- Those who work in the construction industry but is not construction-related are also exempted from CIS:
Material delivery, scaffolding, architecture, surveying, carpet fitting, canteen and site facilitators
Do I need to register for CIS?
The following factors will help you establish whether you require CIS enrollment:
- Minimum pay: The legal minimum salary must be paid to all subcontractors. This is unaffected by CIS.
- Pension contributions: Some subcontractors who make more than £10,000 per year are automatically enrolled in a government-mandated pension plan, although they can opt-out after a month. Employing contractors are not required to match their employees’ contributions.
- Statutory benefits: Sick pay, holiday pay, maternity pay, and paternity pay are not included in the CIS. Government programs may help those enrolled in CIS who require assistance.
- Employment legislation: The legislation that defines and surrounds CIS is constantly changing, so you must stay up to date on any changes and how they may affect you.
Do I have to pay as I go all the time?
No. Instead, you might opt for ‘gross payments’ with CIS. You’ll pay the same amount but in one lump payment at the end of the fiscal year, which means you’ll have to fill out a few extra forms. On the HMRC website, you can apply for gross payment status.
What happens if I overpay?
It’s your responsibility to make sure your tax payments are correct, but you may recover the difference if you overspend CIS or PAYE.