Construction Industry Scheme
Construction Industry Scheme (CIS)
If your business activity is in construction it will be included in the Construction Industry Scheme.
This may be as simple as having tax deducted at source by your customers from invoices you have issued for work done to the more complication ofÂ you having to deduct tax from costs incurred from work you have sub contracted out to other businesses.
The rate of tax deducted from your work depends if you have registered as a Sub Contractor with HM Revenue & Customs. The main contractor has to verify you with HMRC, if you are not known to them they will instruct your customer to deduct 30% if you are known it is 20%.
You should receive from your customer, the main contractor, a monthly certificate of amounts earned and tax deducted. These should be retained to make a claim for tax paid against the tax due on you annual profits shown on your self assessment tax return. If you business is a Limited company you can deduct these amounts from the monthly PAYE and National Insurance deducted from employees and the CIS tax deducted from Sub Contractors due to be paid to HMRC each month.
If you sub contract work out you are responsible for verifying your sub contractors with HMRC, deducting tax and issuing monthly Certificates. In addition you have to make a monthly online return to HMRC of these deductions.
Failing to make these returns will incur a fine.
Beware of using labour only sub contractors, depending on their terms of contract with you, HMRC may classify them as employees and come on to you for Employees and Employers National Insurance.
At Edward Lowe Accountants we specialise in providing advice to business in the Construction Industry Scheme otherwise known as the CIS. We provide all the necessary advice to ensure your business is compliant and you do not incur fines. This includes advising on the Self Employed/Employee status of labour only contractors to make sure you do not make any costly mistakes.
In addition, we can provide the full service of verifying Sub Contractors with HMRC, calculate tax deductions from work done, issue certificates, file monthly returns and notify you how much to pay to HM Revenue and Customs.