The Construction Industry Scheme (CIS) is a set of special rules for handling payments for construction work that contractors make to subcontractors. The scheme covers all construction work carried out in the UK, as well as some other related work. If your business is involved with construction operations then it might operate as a contractor or as a subcontractor – or as both.
If you’re a CIS contractor you have to make a CIS return every month – even if you didn’t pay any subcontractors during the last tax month.
If you don’t get your monthly return to HMRC by the deadline you’ll get an automatic £100 penalty. If you don’t then send in your return for some time you’ll get more penalties.
If you’re a construction industry contractor HMRC will expect you to keep certain records. You’ll need to keep details of:
- the gross amount of each payment you make to a subcontractor – excluding any VAT
- the amount of any deduction you made from a payment before you gave it to the subcontractor
- if you made a deduction, the amount of any materials costs – excluding any VAT
HMRC will check these records from time to time – just like it checks employers’ PAYE records.
You must keep your records for at least three years after the end of the tax year they’re for. If HMRC asks to see them you’ll need to make them available and provide any facilities needed to look at them. HMRC may ask you for full sized copies.
CIS uses its own special definition of the term subcontractor. So even if you don’t normally think of yourself as a subcontractor, you could be treated as one under CIS.
Under the rules of CIS, you’re a subcontractor if you agree to do construction work for a contractor. It doesn’t matter how you actually carry out the work – you could do it yourself, get your employees to do it, use your own subcontractors or make some other arrangement.
Subcontractors can be self-employed individuals, any type of business, or other bodies and organisations.
We can handle all registrations for contractors and subcontractors and all monthly and annual returns. Please contact us for a free no-obligation initial consultation.