CIS

Many subcontractors find themselves overpaying tax and National Insurance contributions (NIC). If you are in this position then HMRC should automatically process your refund after you have completed and submitted your tax return. It is also important to remember to put the amount of CIS tax deducted in the correct box on the tax return.

When calculating the actual amount of tax to you pay on your tax return, you can take into account any expenses ‘wholly and exclusively’ paid out for the purposes of your business, such as van expenses, tools and materials and administrative costs, including mobile phones.

You will receive a ‘payment and deduction’ statement, sometimes called a PDS, every time you are paid. The statement shows the contractor's name, details of the payment(s) made, the cost of any materials incurred and the deduction(s) made from the payment(s). It is important that you retain these statements (as well as details of your expenses) as you will need them to do your tax return.

Under the CIS, contractors are required to check whether workers are ‘registered’ with HMRC. In order for the contractor to do this, they will need your Unique Taxpayer Reference (UTR) and National Insurance number.

If you decide to register for the CIS then the contractor must deduct and withhold tax at a rate of 20% of the amount of your invoices.

You have to register as a contractor if you pay contractors for construction work and you have to register as a sub-contractor if you pay contractors for construction work.

You do not have to register for the CIS scheme if you only do certain jobs, including: 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 ( running a canteen or site facilities).

CIS covers most construction work, this can include work to: a permanent or temporary building or structure and civil engineering work such as roads and bridges

Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments and pass it to HM Revenue and Customs (HMRC).

The Construction Industry Scheme (CIS) is a HMRC scheme for taxing individuals and businesses, including Limited Companies working within the construction industry.