What is the Construction Industry Scheme and how does it work?
A tax deduction scheme for both contractors and subcontractors in the construction sector, CIS helps to reduce levels of fraud and tax evasion in the industry by ensuring that subcontractors declare their tax and National Insurance (NI) to HMRC.
It works in the same way as the PAYE system for employees in the sense that it requires contractors to withhold either 20% or 30% of the subcontractor’s payments (depending on whether they’re registered or not) to then pay on to HMRC.
For more information on CIS, take a look at our Construction Industry Scheme page.
Working through an umbrella company – am I a contractor or subcontractor?
A contractor is hired directly by a client to carry out a project, but they might need to hire a subcontractor to help out with the work. This could be because they need additional workers, or there may be certain specialist areas where they don’t have the expertise.
A subcontractor is hired by the contractor – not the client.
With regard to CIS, an umbrella company contractor is seen as a subcontractor
How do I register for CIS as an umbrella company contractor?
Unlike a contractor who is required to register for the scheme, a subcontractor doesn’t have to, but in not doing so, deductions are still taken from their payments, but at the higher rate of 30% (as opposed to 20%).
As an umbrella company doesn’t have any involvement with the CIS process, the umbrella contractor will need to register for the scheme themselves.
With Contractor Umbrella, once you’ve completed our sign-up form, you’ll need to provide your CIS reference number, and if you’ve not yet registered then we’ll send you a link taking you to the HMRC website where you can do so.
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.
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