Construction Industry Scheme - Payroll Information from Michael Harwood & Co

The Construction Industry Scheme (CIS) imposes a set of specific rules governing the payment of subcontractors working in the construction industry.

Contractors and the Construction Industry Scheme

If you are a contractor and wish to engage others to work for you, you must work out whether the relevant work falls within the remit of the CIS Determining whether a person is employed or self-employed is not always easy, and CIS accountants, Michael Harwood & Co can you help to decide whether a subcontractor should be classified as self-employed.

Contractors will need to do the following under the CIS:

  • Register for the scheme
  • Verify subcontractors with HMRC to establish whether payments should be gross or net
  • Keep appropriate records
  • Make the appropriate deductions
  • Submit monthly returns to HMRC, even where no payments are made
  • Issue payment statements to subcontractors

Subcontractors and the CIS

Subcontractors who work under the CIS scheme are required to register with HMRC before they start working and also to keep HMRC informed of any relevant changes to the business, including the business name, structure and partners or the business address.

Upon registering for CIS, subcontractors are set up to receive payments 'under deduction'. This means that contractors will deduct 20% from most of the value of the invoices and pay the sum to HMRC. Subcontractors not registered under CIS will have tax deducted at the higher rate of 30%.

Deductions will not be made for the following:

  • VAT
  • Construction Industry Training Board levy
  • Manufacturing or prefabricating materials
  • Plant hire
  • Materials
  • Consumable stores

A subcontractor can apply to be paid gross, with no deductions, if their business meets certain qualifying conditions.

We can update you on the current regulations. For more help with your CIS needs, contact Michael Harwood & Co today.