The construction industry is growing, with 325,736 firms operating in the UK in 2020 and an economic output of £113 billion. If your business is one of them, it’s likely you’ll need to register for the construction industry scheme (CIS).

This comes with a set of complicated rules that can be hard to make sense of if you’re new to it, and it affects contractors and subcontractors in different ways.

Originally brought in to minimise tax evasion and protect workers from false employment, the CIS sets out rules regarding payments to subcontractors in the construction industry. Under the scheme, contractors deduct money from a subcontractor’s payments and pass it on to HMRC.

These deductions count as advance payments towards the subcontractor’s tax and national insurance contributions. Before making the payment, the contractor must verify the subcontractor’s status with HMRC to establish the correct amount of tax to deduct.

The deduction rates are 20% for registered subcontractors and 30% for unregistered subcontractors.

Alternatively, the subcontractor can claim gross payment status and be paid in full, without deductions. Talk to us to find out more about gross payment status. Contractors must then report all the payments they have made under the scheme to HMRC by the 19th of each month.

Contractors in the building industry that pay subcontractors to do construction work are required to register for the CIS. Some businesses that don’t carry out construction work may also be included in the scheme, as they must register if they usually spend more than £1 million a year on construction. Subcontractors will be subject to a higher-rate deduction unless they register for the CIS.

It is possible for a business to be treated as both a contractor and subcontractor, and different rules apply to both of these statuses.

What kind of work is included?
The CIS covers most construction work in the UK that comes under the following categories:

  • Preparing the site, such as laying foundations and providing access works
  • Demolition and dismantling
  • Building work
  • Alterations, repairs and decorating
  • Installing systems for heating, lighting, power, water and ventilation
  • Cleaning the inside of buildings after construction work

However, it doesn’t usually include people who only do specific jobs, such as architecture and surveying, carpet fitting, or delivering materials.

Briants work with Companies executing projects in excess of several million pounds all the way through to smaller self-employed Sub-Contractors and Tradesmen.

We have good practical expertise about the variances of how VAT affects some projects and not others. It may be something as simple as forming an additional company to ascertaining the somewhat complicated VAT situation for Companies with international projects.

In the case of our smaller Clients we work with them to consider the appropriateness of their trading position, should it be, a Company, a Partnership or a Sole Trader and the Tax and VAT implications for their business. Our payroll department, of course, operates the CIS system both for Contractors and Sub-Contractors.

Construction services include;
  • Advice on CIS returns
  • Minimise risks from pricing and supply fluctuations
  • Bookkeeping & payroll

Talk to us today

Arrange a chat with Tom, Ian or another member of our accounting team so we can learn more about you, your business and how Briants can help.