CIS is a scheme which requires building contractors to deduct tax from payments they make to their subcontractors and pay it over to HM Revenue and Customs (HMRC). These deductions are usually 20% for a registered subcontractor but can be as high as 30% for an unregistered subcontractor. These deductions will then count toward the subcontractor’s final Tax and National Insurance liability at the end of the tax year.
This is another example of HMRC passing the responsibility for tax collection to others who then become responsible for the operation of complex rules.
The CIS scheme covers the majority of construction work except for:
- architecture and surveying
- scaffolding hire (with no labour)
- carpet fitting
- making materials used in construction including plant and machinery
- delivering materials
- work on construction sites that’s clearly not construction – for example, running a canteen or site facilities
If you are a Contractor, you must register for CIS and submit monthly CIS returns. These returns must be made up to 5th of each month and must be filed by 19th of the following month along with any payment required. For example 5 June period must be submitted by 19 June.
If you don’t meet the requirements such as missing deadlines penalties will be issued. The cost of the penalty can vary for example if you are one day late filing your return the penalty can be £100. If you are 6 months late the penalty can be £300 or 5% of the CIS deductions, depending which is the highest amount.
If you would like support in the set up and or to complete the returns we can assist you to ensure all requirements with HMRC are met.