What is the Construction Industry Scheme, CIS?
The Construction Industry Scheme (CIS) sets out the rules for how payments and taxes to subcontractors for work in the construction industry must be handled.
As a contractor, you must:
- register for CIS with HMRC.
- check that your subcontractors are registered with HMRC.
- pay subcontractors accordingly; Their Invoice value less CIS Tax.
- submit monthly CIS returns to HMRC.
- pay CIS to HMRC monthly (You are collector of the CIS for HMRC).
As a Subcontractor, you must:
- register with HMRC; a simple online application as self-employed.
- if you are not registered, contractors have to deduct the higher 30% rate instead of the registered 20% rate off your invoices.
Running a Limited Company under CIS
You can offset your CIS deductions Taken/Suffered from payments received against the following:
- any PAYE payments due to HMRC
- your National Insurance contributions
- CIS deductions the company has made from its subcontractors
HMRC will repay any deductions that the company is not able to offset against its PAYE liabilities.
Offsetting your Monthly CIS liabilities to HMRC
You can offset your CIS liabilities against your PAYE/NI payments each month.
This will either reduce your CIS payments or eliminate them!
CIS Record Keeping
You must record all the amounts taxed.
Sign up for CIS
To sign up for the Construction Industry Scheme, please login into HMRC online service to register – https://online.hmrc.gov.uk/login
HMRC have a dedicated helpline 0845 366 7899 if you get stuck.
Reverse Charge VAT for Contractors
Domestic Reverse Charge came in in Mar 2021 and applies to VAT-registered Contractors and VAT registered Intermediary Customers.
This means you don’t need to charge VAT on to your Customer if they are not the End-user.
Your Invoice will not show VAT but has to say “Reverse-Charge Supplies
You can get more information about the Construction Industry Scheme at www.gov.uk/what-is-the-construction-industry-scheme