Construction Industry Scheme (CIS)
The rules of how payments to subcontractors for construction work must be handled by contractors are governed by specific legislation known as Construction Industry Scheme (CIS). This scheme sets out guidelines on how much tax you pay and when you pay it. Unless you register for gross payments and fulfil certain conditions, net payment basis will apply.
If you do not comply with the CIS tax laws your business can face significant penalties and you may be forced to treat your subcontractors as employees. The scheme applies mainly to contractors and subcontractors in mainstream construction work, however businesses or organisations whose core activity isn't construction but have a high annual spend on construction may also count as contractors and fall under the scheme.
Contractors under CIS have got obligations including:
- Registering with the scheme
- Checking if your subcontractors are registered
- Paying subcontractors
- Submitting monthly returns
- Reporting changes
We can help you with the registration and preparation of monthly statements to HMRC or simply just advise you on what is needed and review your company’s compliance to eliminate the risk of paying too much tax.