What is the Construction Industry Scheme?
The Construction Industry Scheme (CIS) is a set of government regulations that control subcontractors’ tax payments. You need to know how it affects you if you work as a subcontractor, or if you run a business that employs subcontractors.
To find out more about the Construction Industry Scheme please follow the links below:
You must register for the CIS if you are a contractor that hires subcontractors to undertake construction works.
You are classed as a CIS subcontractor if you do work for a CIS contractor
Does the CIS apply to a homeowner that’s making their own building improvements?
The Construction Industry Scheme applies to many, specific types of individuals and businesses that work in construction. This ranges from builders to housing agencies and even includes businesses who spend more than £1m on construction over a three year period, even when they are not construction businesses. It involves contractors and subcontractors, but not usually private individuals carrying out their own home improvements.
What has the CIS got to do with tax?
HMRC introduced the CIS because they felt that, because they are not classified as employees, they were losing out on some income tax payments from subcontractors in the construction industry. Now, a CIS contractor pays a portion of their subcontractors’ wages directly to HMRC before it reaches the subcontractors. Effectively, the CIS contractor acts as a tax collector for HMRC, they become part of the administrative process. These payments are then put towards subcontractors’ income tax and National Insurance payments. CIS subcontractors see this deduction on their payslip and include the figures on their self assessment tax return.
As a subcontractor, could I pay too much through CIS?
It is possible to pay too much tax and National Insurance as a subcontractor through CIS. HMRC have a system in place for claiming a CIS refund and they will repay your overspend. You claim through the self assessment process and can include any other applicable tax reliefs at the same time. If you think you might be owed a CIS tax refund, you can use our free CIS Tax Refund calculator to see how much its worth.
For further Tax information, please follow the links below: