The Construction Industry Scheme: The basics

The Construction Industry Scheme (CIS) is a special set of rules that deal with how tax and national insurance contributions should be handled when subcontractors are getting paid.

As well as making it difficult for subcontractors to avoid paying taxes, CIS aims to:

  • ensure it is simpler for companies to comply with their income tax obligations
  • reduce the amount of regulation and administration that companies have to go through.

The scheme has been credited with being an effective measure for ensuring that construction businesses pay income tax properly, as well as increasing confidence in the sector as a whole. Businesses that rely upon subcontractors also acknowledge that CIS is simple to manage and takes less time than the older tax regimes.

Here are a few CIS basics which are essential pieces of knowledge for anyone working in the sector.

Contractors and subcontractors

Under CIS, you are a contractor if you make use of subcontractors, and you are a subcontractor if you are hired by a contractor to perform construction related labour.

It is important to note that you can be both in different circumstances under CIS. If you or your company works for a larger one while at the same time hiring contractors to do work for you, you qualify as both and will need to account for this.

Both contractors and subcontractors are required to register with HMRC, and the former should always verify that the latter is registered (this can be done using a special HMRC helpline) before engaging with them.

Through their registration in CIS, contractors must make the necessary deductions when paying invoices and these deductions are made at 20% instead of the usual 30%.

Work covered by CIS

The work covered by CIS is a broad category that includes most construction work that relates to building projects. Site preparation, decoration and refurbishment are all included in the scheme, although there are the following exemptions:

  • delivering materials
  • fitting carpets
  • surveying and architecture
  • scaffolding hire (with no labour)
  • construction work outside the UK
  • construction site related work that is not actually construction such as running the site canteen.

While work carried out in countries other than the UK is not included in the scheme, any work undertaken in the UK by businesses usually based outside the UK is covered and must therefore be registered.

Getting the basics right

It’s all well good seeing it written down, but sometimes the technicalities and complexity of a scheme like CIS mean that you need to get some extra expertise and experience on your side.

We can help you make sure that you not only have the right definitions and know exactly how CIS relates to you, but we can also make sure all of your paperwork is in order and ready to go on time.

Call us on 01375 383 888 if you need more information or advice on the VAT Retail Export Scheme and its technicalities.

You can also fill in our contact form or email info@blandbaker.co.uk

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Grays
Essex
RM17 5RY

Tel: 01375 383888
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E-mail: info@blandbaker.co.uk