The Construction Industry Scheme (CIS), in its present form, has been around since 2004 but not everybody is clear on what is required and who it applies to. In essence the scheme means that when subcontractors are working for a contractor, that contractor must deduct money from their pay on behalf of the HMRC as an advance payment towards the subcontractor’s tax and National Insurance.
Whilst Subcontractors are not legally required to register with the scheme, they are technically penalised if they do not. Instead of the designated 20% deduction for those that are registered, the contractor is required to deduct 30%.
Anyone who does construction work for a contractor, as either a sole trader or limited company contractor, can register as a subcontractor on the scheme, this includes:
- preparing the site, e.g. 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, there are a number of exceptions from the scheme:
- 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, e.g. running a canteen or site facilities
Under certain circumstances it is possible for subcontractors to make a request to the HMRC to receive their gross earnings and pay their tax and National Insurance themselves at the end of the tax year. However, there are a number of criteria that subcontractors must meet in order to be eligible for this. More information is available from GOV.UK
At Stepping Stones we work with many companies within the construction industry and as such are well placed to provide advice and guidance to both contractors and subcontractors. Why not give us a call and see how we can help you, we would be delighted to work with you.