Working in the Construction Industry and impacted by the recent changes?
We’ve got a dedicated team here to help with specific tax, accountancy and financial advice when you’re a CIS Limited Company or Sole Trader.
What is the Construction Industry Scheme?
HMRC has created the Construction Industry Scheme (CIS) to tackle the problem of tax evasion in the construction industry. With so many self-employed workers taking on multiple jobs, HMRC saw a need to create a special taxation system to minimise losses.
The rules of CIS apply to payments made to subcontractors by contractors as part of construction projects. It does not apply to employees. Of course, HMRC has established stiff penalties for non-compliance.
Dedicated services for CIS Limited Companies
We offer sector-specific tax, accountancy, and financial advice and services to sub-contractors running their own Limited Company.
If you are registered on the CIS scheme, we can help ensure you comply with all the statutory responsibilities that fall on the shoulders of limited company Directors as part of HMRC’s regulations. Using our innovative platform, we help make running your business so much easier.
Sole Traders, we’ve got you covered
Rely on us to help make registration a straightforward process as our services extend to sole traders operating under HMRC’s CIS scheme. We manage the receipt and processing of gross payments, and make sure all the correct deductions happen when they need to, all based on your tax status.
Following CIS guidelines can be complicated if you are a sole trader, but not with us on your side. We can help you complete your SATR. We will also ensure you comply with all legislation with services that include a thorough assessment of Supervision, Direction, and Control (SDC) for every assignment.
That will give recruitment agencies and employees the peace of mind of knowing that all income is being taxed correctly.
Working for yourself has never been easier
For fast payments and great customer service speak to a member of our friendly team:
CIS Umbrella Companies can benefit too
Working on a CIS project as an umbrella company? We offer straightforward and convenient PAYE-based payment solutions for you.
Our services are geared towards projects in which end clients and agencies need an intermediary that is registered for CIS, and for which the employee has not met Supervision, Direction, and Control (SDC) criteria for the assignment. We can also help in situations where the agency or end client do not want to employ sole traders.
We make working for yourself easy!
1
Get started in around 24 hours
Be in a position to maximise your earnings from day one with us.
2
A flexible solution for the self-employed
Our umbrella company gives you a payroll solution that just works.
3
Know when you are getting paid
Friday is payday. Every week. No worrying when the money’s coming.
4
The peace of mind of knowing you are insured
With our solution, you get protected at no extra cost with contractor insurance.
5
Support from a professional team
Our friendly and expert team are there to help you Monday to Friday.
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Always-on access to your account online
All the information about your account is available for you to view online 24/7.
FAQs
Does CIS apply to you?
The CIS regulations apply to all UK construction operations on land and at sea. That includes:
- Building work
- Alterations
- Extensions
- Repairs
- Groundwork
- Structural engineering
- Civil engineering
- Installations
- Demolition
- Dismantling
The scheme covers permanent and temporary work and can encompass interior cleaning, plus exterior fencing and landscaping if it is part of a construction project.
You will be subject to the CIS rules if you are a contractor or subcontractor working as a sole trader, limited company, or partnership in the construction business.
When does CIS not apply?
Not all construction projects fall under the terms of CIS. Here are some of the exceptions:
- Shipbuilding—not eligible because a ship is classed as a vehicle
- IT system installations
- Security system installations
- The work of architects and quantity surveyors
- Building and engineering consultancy work
- Interior design and exterior landscaping contracts
- Construction support services, including canteen, medical, safety, and building materials supply services
How are contractors defined in CIS?
For the purposes of the CIS scheme, contractors can include property developers, housing associations and local authorities who spend at least £1 million per year for at least 3 years on construction projects.
How do I register as a CIS self-employed sub-contractor?
To do this, you need to decide what type of business model you want to operate under. All of the following can register for CIS:
- Sole traders
- Partnerships
- Limited Company
How are sub-contractors defined in CIS?
The definition of a sub-contractor for the purposes of the CIS legislation is someone who is engaged by a contractor to carry out the terms of a contract relating to a construction project. That can mean executing the project or supplying the human resources to complete the work.
Therefore, subcontractors can include intermediaries and recruitment agencies, as well as those working as a sole trader, limited company, or partnership.
Which CIS tax rate needs to be applied?
CIS established 3 levels of tax deduction, one of which must be applied by a contractor when sending money to a sub-contractor. Below, we outline these 3 options:
1. Gross Payment (No deduction is made)
- This applies when the subcontractor is registered for gross payment status with HMRC and passes qualifying tests.
- The Business Test: The subcontractor carries out work in the UK that is managed chiefly through a bank account.
- The Turnover Test: The subcontractor is a sole trader with an annual turnover exceeding £30,000.
- The Compliance Test: The subcontractor has no overdue tax returns or payments.
2. 20% Tax Rate (not including VAT and the cost of plant hire and materials)
This is the rate for subcontractors who are fully registered under the CIS scheme.
3. 30% Tax Rate (not including VAT and the cost of plant hire and materials)
This is the rate for subcontractors who are NOT fully registered under the CIS scheme.
To be compliant, contractors must provide all their sub-contractors with a CIS certificate or voucher that confirms the CIS deductions have been made. CIS returns must be made to HMRC at the end of each month.
What are the penalties for CIS non-compliance?
As you might expect, HMRC has introduced tough penalties for contractors who don’t comply with CIS legislation. It’s therefore vital that contractors keep their accounts up to date, make CIS payments on time, and submit their returns before the deadline.
How does Spectrum Payroll Solutions help?
It is easiest to explain how Spectrum Payroll Solutions plays such a vital role in CIS compliance by using a typical example of a construction project.
The contractor hires a sub-contractor to complete a project. To do that, the sub-contractor might use some of their own staff, but they are likely to pull in additional resources.
This requires them to engage with third parties such as recruitment agencies to find the available talent they need. These third parties will use a CIS-registered intermediary, such as Spectrum Payroll Solutions, to engage with employees and provide payroll services for the project.
Spectrum Payroll Solutions will ensure each of the workers—whether they are employed as a sole trader, limited company, or umbrella company—is paid in a compliant way, using the most advantageous method.
The contractor will remain responsible for ensuring CIS compliance for payments made to the main sub-contractor. The contractor will need to follow the HMRC guidelines when paying the main sub-contractor:
- Confirming the sub-contractor is registered as self-employed.
- If not, the CIS scheme will not apply and the sub-contractor should be paid via PAYE on the payroll.
- Checking that the sub-contractor is HMRC-verified.
- If the sub-contractor is not included in the contractor’s monthly CIS return for the current tax year, or for one of the previous two years, the contractor must contact HMRC to verify their details.
- When all registration and verification processes have been carried out, the contractor deducts tax payments at the source for any payments made to the sub-contractor. See the tax section below for the tax rates that need to be applied.
- Sub-contractors are responsible for carrying out the same verification checks on THEIR subcontractors.
Working for yourself has never been easier
For fast payments and a great customer service speak to a member of our friendly team: