5 Questions about CIS

If you are in the construction industry you’re probably pretty familiar with the term CIS, for those of you less familiar with the term, CIS stands for Construction Industry Scheme.

What is CIS?

CIS is a tax deduction scheme that involves tax being deducted at source from payments that relate to construction work. These deductions count as advance payments towards a sub-contractor’s Tax and National Insurance Contributions.

Do I need to register?

You must register for CIS if you are a contractor, if you are a sub-contractor, you don’t have to register but if you don’t register you will have deductions withheld at a higher rate, instead of having 20% deducted from your invoices it will be 30%, as a rule it is better to be CIS registered so that you only have 20% deducted from your invoices.

Who is classed as a contractor?

You have to register as a contractor for CIS if you work in the construction industry and you have any sub-contractors or if you spend over £1M on construction contracts within a 3 year period.

When do I need to register for CIS?

CIS covers most construction work to buildings this includes site preparation, installation of heating and electrical systems, Alterations, decorations and refurbishment and even the cleaning of the inside of a building after construction work. There are some things that are excluded such as architects & surveyors and carpet fitters and things like scaffolding where no labour is provided or if you only deliver goods to a construction site. If you are unsure if your services come under CIS then you can call HMRC on 0300 200 3210 and they will be able to let you know.

What does being CIS registered mean?

If you are a contractor you must deduct the CIS element from sub-contractors invoices and pay this over to HMRC, this can be done through your PAYE scheme if you have one. When you register for CIS HMRC will change your scheme to a PAYE with CIS scheme. Deductions will then be paid to HMRC either monthly or quarterly. The payments you make to HMRC can be reduced by deducting any CIS your business has had deducted from contractors when you are acting as a sub-contractor.

How can you help?

NGR Accountancy can help you if you are a contractor, a sub-contractor or both, we can ensure all your paperwork is carried out correctly and all filings are made on time to help make sure you avoid any penalties from HMRC for late filing. If you have any questions you can get in touch and we’ll help put your mind at ease.