What is the Construction Industry Scheme?
CIS is a tax deduction scheme for both contractors and subcontractors in the construction industry.
The aim of the scheme is to reduce levels of fraud and tax evasion in the industry, as well as to help subcontractors to spread their tax liabilities over the financial year – the deductions count as advanced payments towards the subcontractor’s tax and National Insurance.
It’s similar to how the PAYE system works for employees, as it requires contractors to withhold either 20% or 30% of the subcontractor’s payments to then pay on to HMRC.
A contractor has to register for the Construction Industry Scheme and must do so before hiring any subcontractors.
A subcontractor, however, doesn’t need to register, but in doing so will only have 20% of their income withheld. If they don’t register, this figure will go up to 30%.
What work is covered by the Construction Industry Scheme?
Permanent or temporary building or structure work, as well as civil engineering (such as roads and bridges), are all covered by the scheme.
Examples of the type of duties covered by CIS include:
- Preparing a site for work, as well as the clean-up inside a building after work has been carried out.
- Demolition
- Any repairs or alterations
- Decorating
- Installing systems for heating, lighting, power, water and ventilation
The type of work that doesn’t fall under the scheme, includes:
- Carpet fitting
- Making materials used in construction
- Hiring out scaffolding (with no labour)
- Architecture and surveying
- Running site facilities
CIS and Umbrella Company Contractors
Some umbrella contractors may choose to join an umbrella company that specialises in construction in order to make the process easier.
This will usually involve the umbrella company being registered with HMRC for CIS.
We hope you have found this page useful. If you have any further questions on CIS or anything else, our team of experts are available to answer any queries, so give us a call on 01206 591 000 or email jaime.thorpe@contractorumbrella.com.
