Part 3: Construction Industry Scheme (CIS)
Welcome to Houzz Pro’s 'Hot Topics in Financial Management' series, where we have teamed up with Raj Singh, a financial expert from 5 Rivers Accountancy, to bring you key insights into establishing and maintaining a profitable and healthy business.
In this third article and video of the series, we define and explain in detail what is the Construction Industry Scheme, how to prepare and register for it, and how it can be beneficial for your company.
Read on or click here to watch the webinar to discover the latest information for this important business step.
What is CIS?
The Construction Industry Scheme has been implemented by HMRC to keep track of the flexible and transient labour force of the construction industry, and prevent fraud and tax evasion. The scheme enables contractors to deduct taxes and National Insurance Contributions from subcontractors, allowing the subcontractor to pay their tax up front without having to put money aside for the hefty tax bill at the end of each financial year.
Does it apply to me?
This scheme applies to anyone who is involved in physical building and construction work, such as home building, alterations, decoration, and repairs. It does not apply to professional services that consult on construction projects, such as surveyors, architects, designers and manufacturers of materials.
Top tip: If you are a subcontractor registered under the CIS scheme, your contractor will deduct 20% of your salary, in a similar way other employers deduct PAYE. If you’re not registered and the contractor cannot verify that you are part of the scheme, they will deduct 30% before paying you. It’s then up to you to register and claim a refund from HMRC.
How do I register?
The quickest and easiest way to registar is by calling the CIS hotline, rather than doing it online. You will need a few details to hand, such as your UTR number, company number, how long you have been trading and details of the services you intend to provide.
What do I need to do?
As a subcontractor, once you’re registered on the scheme, you hand over your UTR number to your contractor to verify your details. Payments then made from contractors to subcontractors who are registered under the scheme are subject to a 20% deduction for tax and NICs (minus materials).
As a contractor, once you’ve made the deduction from a subcontractor’s salary, the money must be paid directly to HMRC, and each month the contractor must inform HMRC who they have paid and how much they’ve deducted from their invoice.
Whether you are a contractor or a subcontractor, it’s always worth consulting with an accountant or seeking professional advice based on your own situation so you can be sure you are doing the right thing for you and your business.
Click here to watch our webinar with financial expert, Raj Singh and gain more valuable advice on the Construction Industry Scheme.
