Running a construction business can already feel like a challenge but these types of enterprise also have to deal with the requirements of the Construction Industry Scheme (CIS). Here at Lewis & Co, we regularly support both contractors and sub-contractors in navigating CIS requirements, ensuring they remain compliant.
The CIS is a HMRC tax scheme that applies to most construction work carried out in the UK. Under CIS, contractors are required to deduct tax from payments made to sub-contractors and pay these deductions directly to HMRC. CIS deductions act as advance payments towards the sub-contractor’s tax and National Insurance liabilities.
Typically, deductions are made at:
• 20% for registered sub-contractors
• 30% for unregistered sub-contractors or those that cannot be verified by HMRC
• 0% for sub-contractors approved for Gross Payment Status (and have met HMRC’s strict compliance tests)
If you operate as a contractor, you are required to verify sub-contractors with HMRC before making payments and ensure the correct deduction rate is applied. Your responsibility also involves submitting monthly CIS returns to HMRC, providing sub-contractors with deduction statements, keeping accurate payment records and paying CIS deductions to HMRC at the appropriate time.
It is important to do this accurately, as even small administrative mistakes can result in penalties and interest charges. It’s not unusual to talk to contractors who have accidentally applied deductions incorrectly, failed to submit returns on time or overlooked verification requirements.
Many sub-contractors assume the tax deducted by contractors is their final tax bill. However, CIS deductions are simply payments on account and need to be reconciled. If a sub-contractor has ended up paying more tax than they owe during a tax year, they can claim it back. However, to do that, means submitting a self-assessment tax return to HMRC sooner, rather than later.
Having supported construction businesses across the South East for more than 40 years, we understand the unique challenges faced by contractors and sub-contractors. We can help you with CIS administration and construction industry clients we currently have on our books that are in the scheme include:
• Painters/decorator
• Builder
• Electrician
• Plasterer
• Groundworks/driveways operatives
• Plumbing and heating engineers
• Flooring contractors
• Roofers
Our team provides practical, straightforward advice on all aspects of CIS, from initial registration and monthly compliance to tax planning and reclaiming overpaid tax.
If you’re unsure about your CIS responsibilities or would like support managing your construction business finances, our team would be happy to help. Don’t hesitate to contact us on tel: 01892 513515.