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Construction Industry Scheme

Are you a contractor based in Leeds or the surrounding areas? Lyel Accountants can help you with the set up of the Construction Industry Scheme.

Construction workers

Construction Industry Scheme Accounting

The Construction Industry Scheme (more commonly known as CIS) is set up for businesses involved in the construction sector either as a sub-contractor or a contractor. It also affects those businesses that may not necessarily be involved in the construction sector however may spend a vast amount on construction work. Those involved in the construction industry can be any of the following: Tradesmen, Property Developers, Builders and Agencies supplying labourers.

It also applies to businesses who tend to spend over £1 million annually on construction services. If your business uses subcontractors or spends a substantial amount on construction work, it does then count as a contractor under the Construction Industry Scheme.

CIS deems you a subcontractor if you work for a contractor and are self-employed as one or as a limited company. However, if you’re employed by a contractor then you don’t fall under the remit of CIS.

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Construction workers

Construction Industry Scheme Tax Return

You can be seen as a contractor and a subcontractor under the Construction Industry Scheme. For example, if your company works for a bigger contractor and then subcontracts to tradesmen this would then actually make you qualify under both areas. If you’re a ‘larger’ contractor, you can subcontract into multiple areas by registering as a ‘multiple contractor’. This allows you to then split the company up into separate divisions for CIS purposes. This then allows for each division to work as a ‘contractor’.

If you are a contractor, then you do need to register with HMRC. Then, once done, check before you pay a subcontractor on what their employment status is and to establish if they qualify as an employee (in which case they will need to be paid through PAYE like employees), or if they are self-employed and have registered themselves as a subcontractor with HMRC. If they are registered, HMRC will tell you whether you should pay them gross or should make the standard deduction of 20% from the payments owed to them.

If they are not registered with HMRC. If HMRC verifies them as a subcontractor, they will tell you to make the standard 20% deduction from the payments owed to them. If HMRC can’t verify the subcontractor, they will tell you to make deductions at the higher rate of 30%.

Contact us today using the form below to arrange a meeting with one of our team, and benefit from your tax return today.

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