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Construction Industry Scheme: Tax Guide to the CIS Workers

Are you a self-employed builder? Do you know you could be due a tax refund? The average tax rebate with Tommy's Tax is around £3,000! We know, right?!

Learn everything about what the Construction Industry Scheme (CIS) is, what are its benefits and how you can claim your CIS tax refund below!

What is the Construction Industry Scheme?

HMRC created the Construction Industry Scheme (CIS) for contractors and subcontractors to minimise tax evasion within the construction industry since the number of self-employed workers in the UK continues to increase.

 

Who can benefit from it?

The Construction Industry Scheme (CIS) applies to all contractors and subcontractors, including sole traders, partnerships or companies that work in the construction industry.

In addition, businesses that don’t fall under the construction tag but engage in construction work, such as housing associations and property developers, and spend £1 million or more each year in 3 years need to comply with CIS. Here are the types of work that fall under the construction tag:

  • groundwork
  • general building (bricklaying, plastering, roofing, etc)
  • alterations
  • repairs
  • demolition

The rules outlined in Construction Industry Scheme (CIS) apply to all payments made by a contractor to a subcontractor under a construction contract. 

However, it does not apply to all employees. Those who don’t comply with the scheme will face expensive penalties. Lastly, CIS rules apply for businesses that are based outside of the UK, but do construction work on a contractor or subcontractor work in the UK.

 

Construction Industry Scheme (CIS) for Contractors

You have to register with Construction Industry Scheme (CIS) if the following apply to you: 

  • You pay subcontractors for construction work;  
  • Your business isn’t classified as doing construction work, but your annual spend on construction amounts to more than £1 million. 

As a contractor, you also need to follow certain rules: 

  • You have to register with Construction Industry Scheme (CIS) before hiring your first subcontractor; 
  • You have to check if you should employ a worker rather than subcontract them. Penalties will be given if you should have hired them as an employee instead; 
  • You have to check with HMRC to see that your subcontractors are registered with CIS; 
  • You have to deduct money from your subcontractor’s pay to give to HMRC which counts towards their tax and National Insurance bill; 
  • You have to file monthly returns and keep all CIS records. Otherwise, you will get penalised; 
  • You need to let HMRC know if there are any changes to your business. 


Construction Industry Scheme (CIS) for Subcontractors

You should register for Construction Industry Scheme (CIS) if your work for a contractor and are either:

  • Self-employed;
  • The owner of a limited company.

As part of CIS, a contractor deducts 20% from your payments to give to HMRC, which counts towards your tax and National Insurance Bill. Although you can choose not to register with CIS, contractors will deduct 30% from your payments if that is the case.

 

Construction Industry Scheme (CIS) Benefits

But what are the Construction Industry Scheme (CIS) benefits? Here they are!

  • You are guaranteed regular income. As a self-employed worker, you can rest assured of being paid for the work you’ve done;
  • You get benefits. When contractors make deductions to your pay, these go to your tax and National Insurance bill. For a self-employed worker, being covered and paying taxes offers lots of benefits, right?

 

If you still haven't filed your CIS Tax Refund, this is your chance!

 

Get a free quote within 72 hours with Tommy's Tax certified accountants and save your time (and money!): 

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Published by Elisa Ribeiro Soares
Elisa Ribeiro Soares