The Construction Industry Scheme (CIS) sets out special rules for tax and National Insurance (NI) for those working in the construction industry. Businesses in this sector are categorised as ‘contractors’ and ‘subcontractors’ and can be companies, partnerships, or self-employed individuals.
HMRC introduced the Construction Industry Scheme (CIS) in 1971, to ensure subcontractors in the construction industry accurately report their earnings.
The CIS applies to a wide range of construction work, including alterations, repairs, decorating, and demolition.
This scheme requires contractors to collect income tax and National Insurance from subcontractors and report this information to HMRC.
What Are Contractors’ Responsibilities Under CIS?
Under the Construction Industry Scheme (CIS), contractors hiring subcontractors for construction work in the UK must register for CIS.
After registering, contractors are responsible for:
- Checking the status of their subcontractors
- Making deductions from subcontractors’ payments
- Filing monthly CIS reports
- Forwarding deductions to HMRC as an advance payment towards the subcontractor’s tax obligations
Do I need to provide my subcontractors with a CIS statement?
Yes, if you’re a contractor, you need to give your subcontractors a CIS statement. Think of it as a payslip that shows how much tax and National Insurance has been deducted from their pay.
You must submit Construction Industry Scheme returns to HMRC, detailing payments and deductions for each subcontractor, and provide this information to them via a CIS statement.
When are contractors required to issue a CIS statement?
You must provide your subcontractors with their CIS statements within 14 days after the end of each tax month.
A tax month runs from the 6th to the 5th. For example, the deadline for issuing a CIS statement for the period from 6th August to 5th September is 19th September.
Can Subcontractors handle their own Tax without deductions?
Subcontractors have the option to apply to HMRC for Gross Payment Status. Upon approval, they will receive full payments without any tax deductions and will be responsible for managing their own tax obligations, similar to a sole trader.
To qualify, they must have a good tax payment history and, if a sole trader, a turnover of at least £30,000 excluding VAT and materials.
What If I’m both a Contractor and a Subcontractor?
You will receive CIS statements for work done as a subcontractor. Since you’re already registered for CIS, only 20% tax should be deducted.
What should I do if I’m missing some of my CIS statements?
If you’re missing any CIS statements, ask your contractor for replacements.
If they’re unable to provide them, contact HMRC with your details, the contractor’s details, and the months that you are missing statements for.
What information must a CIS statement include?
A CIS statement should include:
| Please get in touch if you would like more information about the Construction Industry Scheme (CIS). We can provide advice on the CIS whether you are a contractor or a subcontractor. |
