Construction Industry Scheme Tax (CIS)

The Construction Industry Scheme (CIS) is a very specific part of the UK tax system that details how contractors should hire sub-contractors working within the construction industry, and how payments should be made for work done, including the withholding of income tax. Thanks to the scheme, tax calculations for construction industry organisations are different from those in other sectors, and there are a great many specific nuances that a construction business must understand. Otherwise, there is a risk of failing to meet your tax obligations, which can lead to significant penalties and, in severe cases, accusations of tax evasion.

Thankfully, working with a CIS specialist can make this process significantly easier. Whether you are the main contractor or the sub-contractor, Monetta can deal with all aspects of your CIS tax compliance, including by calculating your liability and deductions, and supporting you in filing the relevant tax returns. 

Contact us today to learn how we can help with questions about the Construction Industry Scheme, calculating CIS deductions, or filing your self-assessment tax return. Call your local Monetta office or use our online enquiry form to request a call back at your convenience.

How can we help?

If you are a new contractor, you may not be aware of all the obligations that you are required to meet before you can legally continue working. Our expert CIS specialists will work with you to ensure you are fully compliant with HMRC, all the while offering easy-to-understand advice along the way.

For main contractors, our CIS team will help you:

• Register with HMRC as a contractor; 

• Verify that sub-contractors are registered with HMRC for the correct CIS deduction; 
• Ensure sub-contractors are paid in compliance with the scheme;
• Prepare and issue CIS Statements for sub-contractors;
• Liaise with HMRC notifying them of monthly deductions made and off-setting against CIS suffered etc; and 
• Advise on special VAT rules which govern how businesses working within the Construction Industry must account for VAT.

For Sub-Contractors, our CIS team will help you:  

• Register with HMRC as a sub-contractor; 

• Ensure that the correct tax has been deducted throughout the year; and
• Ensure that CIS Tax dedcution in the year is off set against the overall tax liability or ensure that the correct refund is made by HMRC. 

Our friendly and experienced team at Monetta will assess your situation and run you through the various steps and documentation that you will need to get started. CIS compliance can be challenging, but our primary goal is to make the process as stress-free as possible, so you can focus on running your business.

What is CIS tax?

CIS tax is an HMRC scheme intended for collecting tax for construction workers who are registered as self-employed. As opposed to self-employed workers in other sectors, CIS demands an automatic tax deduction from your pay where it would otherwise have to be paid manually at the end of the tax year. 

CIS tax covers most construction work, including:

• Demolition;
• Site clearing;
• Repairs;
• Decorating; and
• The installation of power systems.

If you are unsure whether your work can be covered by CIS tax, contact us for expert advice and guidance regarding your situation. 

How does CIS work?

CIS rules are exclusive to the construction sector, and only apply if you are a contractor or subcontractor. As such, it can be difficult for workers who are new to the industry to understand these regulations and manage their tax affairs. In simple terms, contractors under CIS are required to deduct money from a subcontractor’s payments and pass it directly to HMRC. These deductions are counted as advance payments towards the subcontractor’s tax and National Insurance contributions. The standard deduction rate for registered subcontractors is 20%. However, a higher rate of 30% applies to unregistered subcontractors. All contractors must register with HMRC if they pay subcontractors.

At the end of the tax year, the subcontractor must then reconcile these deductions with their overall tax liability. They can claim back any overpaid tax through a tax refund if the deductions exceed their actual tax liability. 

As a subcontractor, a CIS specialist can help you to calculate whether you are owed tax refunds, either from CIS or other tax liabilities, and make sure your self-assessment tax return fulfils all of the relevant legal requirements. For contractors, a CIS specialist can ensure that subcontractor payments are subject to the correct CIS tax rates, and prepare your end-of-year tax statements in compliance with Construction Industry Scheme rules.

Why do I need to deal with CIS tax?

As a self-employed subcontractor, you are liable to pay tax on any business profits made from working for a contractor. Failing to set this up may lead to fines against you for not paying what you legally owe. By signing up for CIS, your tax will be automatically deducted, by the contractor, which can be better for cashflow.

Like any employer, contractors must also understand what their obligations are to their hired workers and take their needs seriously. Subcontractors in the construction industry are not automatically entitled to certain employment rights, including:

• Sick pay;
• Annual leave;
• Maternity leave;
• Minimum pay;
• The right to join a union;
• Health and safety protection; and
• Discrimination rights.

With this in mind, contractors with hired workers should recommend the Construction Industry Scheme to their sub-contractors so they have access to its protections and benefits.

Different industries may have different laws and schemes available, such as CIS tax. To find out which one is best for you and your business, contact an expert for support and advice. 

How can a CIS specialist help?

Our expert CIS specialists can provide specialised assistance to help contractors and subcontractors optimise their financial and tax processes while maintaining CIS compliance. We can:

• Help contractors to make the correct CIS deductions from subcontractor payments, whether that's the standard 20% or higher 30% rate for unregistered subcontractors.
• Maintain accurate records of payments, deductions, and submissions to HMRC.
• Manage monthly CIS returns for contractors that are correct and filed on time.
• Handle payroll for subcontractors, to make payments correctly and report them accurately to HMRC. We can provide guidance on employment status determinations to help businesses comply with employment tax rules and properly classify subcontractors.
• Deliver support if HMRC raises an enquiry or conducts an audit. We can help to resolve any disputes or issues quickly and efficiently, because we understand the specifics of CIS rules and can manage communications with HMRC on behalf of our clients.
• Guide both contractors and subcontractors through the registration process with HMRC, ensuring they are properly set up to comply with the scheme.
• Provide advice on tax planning strategies that help contractors and subcontractors minimise their overall tax liabilities, such as maximising business expenses and allowances that can be claimed under CIS.
• Help subcontractors to reclaim overpaid tax when filing end-of-year tax returns, to make sure you don’t pay more tax than necessary. We can also help subcontractors to verify their deductions.
• Support subcontractors to apply for the CIS gross payment status if they are eligible. If you meet the necessary criteria for gross payment status approval, such as turnover thresholds and compliance with other tax obligations, you may be able to receive payments without deductions.

Our CIS specialists understand the nuances of the construction industry, including what types of work are covered by CIS and which are exempt. This means we can help contractors and subcontractors to apply the correct treatment to different types of construction work and avoid unnecessary complications. Contact us to learn how a CIS specialist from Monetta can reduce your administrative burden and minimise your risk of costly penalties or errors when dealing with HMRC.

Contact Us

To find out how Monetta can support you with CIS Tax, speak to our team today.

Fill in our online enquiry form to request a call back at a time that is convenient for you. Or visit our team page to find out more about our expert advisers and what they can do for you and your business.