The Construction Industry Scheme (CIS) is a statutory tax scheme that applies to Construction Contracts to be subject to tax deduction by the payer. The aim of the system is to eliminate payments which the payee doesn’t declare for tax purposes. These deductions count as advance payments towards the subcontractor’s tax and National Insurance.
1 Who must register for the scheme? What happens if you don’t?
If you pay subcontractors for construction work or you spend an average of more than £1 million a year on construction in any 3 year period, it is a legal requirement for contractors to register for the scheme. Subcontractors don’t necessarily need too, however, the deductions that are taken from their monthly payments will be higher due to the fact they’re not registered. Of course, the contractor’s profits are important so it is certainly something to consider in order maximise it.
2 Are there any exceptions to this scheme?
CIS does cover the majority of construction work to buildings. This included side preparation, decorating and refurbishment. You don’t have to register if you only do certain jobs, including:
- Architecture and surveying
- Scaffolding hire (with no labour)
- Carpet fitting
- Delivering materials
- Work on construction sites that is clearly not construction, e.g. running a canteen or site facilities
It is crucial for contractor’s to understand if their field of work applies to this scheme, if so, they must register to avoid getting fined.
3 What if my business is based outside of the United Kingdom?
Your business is not exempt from this scheme if you are based outside of the UK. The same CIS rules apply if your business is based outside the UK buy only if you provide construction work as a contractor or subcontractor in the UK. It is important that you don’t breach any rules and regulations as again, this may result in a fine which is something nobody wants to be a victim of.
4 What happens if I file my monthly return late?
It is crucial that you are ahead of schedule with regards to filing your monthly return. HM Revenue and Customs (HMRC) will send you a late filing penalty notice telling you how much to pay if you’ve filed your monthly returns late. It is a legal requirement for you pay within 30 days of receiving the notice. Can you appeal this notice if need be? Yes, you can. The two ways you can do this is:
- Through the HMRC’s online service which is located on their website.
- By writing to HMRC. Be sure to quote your Unique Taxpayer Reference (UTR) and the payment reference shown on the notice.
5 What payment methods can I use to pay the CIS fees?
It is of critical importance that you pay the CIS fee by the deadline. The time you should allow very much depends on your payment method.
Same of next day:
- Online or telephone banking (Faster Payments)
- Online by debit/credit card/
- At your bank/building society.
- At the Post Office.
3 Working days:
- Direct Debit (If you’ve set it up the HMRC website)
- By cheque through the post
5 Working days:
- Direct Debit (If you haven’t set one up on the HMRC website)
All of these 5 crucial points are some of the most important aspects when considering the Construction Industry Scheme (CIS). If you want to find out more information about the scheme, visit the HMRC website or please get in touch with us, we’d love to help!