Guide to Operating Under the Construction Industry Scheme (CIS)
This Construction Industry Scheme guide explains the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry. If you’re interested have a look at the your cis site.
What is the Construction Industry Scheme (CIS)?
The scheme applies mainly to contractors and subcontractors in mainstream construction work, however businesses or organizations whose core activity isn’t construction but have a high annual spend on construction may also count as contractors and fall under the scheme.
How do I register for CIS?
- If you have not done so already, register for self-employment by calling HMRC on 0845 915 4515 (opening times are 8am-8pm on Monday to Friday, and 8am-4pm on Saturday and Sunday). You will be sent a Unique Tax Reference (UTR) number.
- After you receive your UTR number, call 0845 366 7899 to register for CIS (opening times are 8am-8pm, 7 Days a week). You will need your National Insurance number for this call. After doing this please then call your cis and will take it from there.
What if I’m already registered for CIS?
If you are already registered for CIS we can help you look after your affairs immediately.
What paperwork with CPS?
Easy. Call us and we will provide you with an application form or you can sign up online via the your cis website. We will need a signed copy of your contract and some photo identification (e.g. your passport). If you are registered for VAT please also inform us of your VAT number. Once we have verified your details with HMRC we can start paying you.
What about Tax Deductions?
This is based on your CIS status, but is usually set at 20%. However, it can be up to 30% if you are not a verified CIS contractor or do not provide your cis with your UTR number.
What about National Insurance?
As a self-employed contractor you will pay Class 2 and Class 4 National Insurance contributions.
The current rates are as follow:
- Class 2 National Insurance contributions are paid at a flat rate of £2.50 a week
- Class 4 National Insurance contributions are paid as a percentage of your annual taxable profits – 9 per cent on profits between £7,225 and £42,475, and a further 2 per cent on profits over that amount
What do I need to do about Self Assessment?
As a self-employed contractor it is necessary to file your Self-Assessment Tax Return by 31 January of each year if done online, or the previous 31 October if not submitted online. Fixed penalties are imposed if these deadlines are not met. The tax you pay will be calculated after you claim your business expenses. Your cis can complete your tax return for you.
How do I know when I’ve been paid?
On the same day we process your payment, we will email and text you. We will also provide you with a tax deduction voucher showing your gross payment and the tax deducted under CIS. You will need to keep this voucher as evidence of tax deducted and use it when you complete your tax return and are offsetting your business expenses.
How do expenses and VAT work?
Any business expenses such as travel and subsistence you incur throughout the year you will need to keep your receipts for you will offset them against your tax when you complete your self assessment tax return.
However, VAT, the cost of materials and certain other costs such as plant hire are not counted as part of your pay so you will pay tax on this proportion of your pay.
At the end of the year, you will need to complete a self-assessment tax return which will include the business expenses you have incurred during the year. HMRC will then work out your tax and NICs bill taking into account the tax that was deducted from your pay. This will show whether you are due a refund or need to make further contributions.
Simply keep your expenses forms with your cis up to date and you may receive a tax refund depending on your person circumstances.
Will I need to keep receipts?
Yes, it is very important that you keep receipts for any expenses, including fuel receipts for mileage and for any subsistence during the day. If you are found to have claimed expenses that don’t have a corresponding receipt, you may be penalized by HMRC for doing so, as well as any additional penalties HMRC may impose.
What to do if my circumstances change?
If you are leaving or taking a break, we will collect all outstanding funds and make a final payment to your band account.
If you’re paid under deduction (tax is deducted from your pay), your cis will give you weekly statements of payments and deductions. Keep these statements to help you fill in your tax return.
For more in depth information on CIS please follow the link to the HMRC website.