Construction Industry Scheme (CIS) – best practice tips for subcontractors

If you are self-employed in the UK construction industry and are working for a contractor, you must register for the Construction Industry Scheme (CIS). The scheme covers practically all aspects of construction works, from site preparation and repairs through to decoration and demolition.

Under CIS, contractors must deduct 20% from your payments which counts towards your end of year tax and National Insurance bill. If you don’t register under CIS, the contractor you are working for must deduct 30%. If the amount you have had stopped under CIS over the year means you have paid too much tax, you may be entitled to a rebate.

While the burden of CIS is mainly on the person or company making the payments, as a subcontractor you also have certain obligations under the scheme. Here are some best practice tips to ensure you are operating correctly and won’t get on the wrong side of HMRC.

Registering under CIS

If you already have a Unique Tax Reference (UTR) number, you can register online here using your Government Gateway ID.

If you don’t have a UTR, you need to register as a new business for Self Assessment. By selecting “working as a subcontractor” means that you will be registered for CIS.

You will also need to have your National Insurance number to hand, as well as your VAT registration number if you are VAT registered.

As well as registering online you can also do it by calling HMRC’s CIS helpline on 0300 200 3210.

Employees (including umbrella company workers) do not have to register for CIS.

Getting paid

When you get paid under CIS, you will normally have standard deductions of 20% stopped.
A word of warning here – make sure you give whoever is paying you (whether it’s Liquid Friday or another party) your correct legal business or trading name. If you get it even slightly wrong, they won’t be able to confirm that you are registered for CIS or verify your status under the scheme. This means you will be deducted 30% when you get paid.

CIS deductions will not be made from the following amounts:

• VAT
• Materials
• Equipment which is now unusable
• Plant hire

Paying tax and claiming it back

Even though you are having CIS deductions stopped throughout the year, you are still responsible for paying the correct amounts of tax and NI so you will need to complete a Self Assessment tax return at the end of the tax year.
On this you will need to record your full income, deductions made under CIS and any expenses you have incurred. HMRC will then calculate if you have any more tax and NI to pay or if you are due a rebate.
If you owe tax you have until 31 January following the end of the tax year to pay it.
If you are due a rebate, HMRC will process and pay this after you have submitted your self assessment. You can do this as soon as the tax year has finished.

Get your rebate

If you think you are entitled to a CIS rebate, we have negotiated a discounted rate on earlybird self assessments with Boox Accounting.
You get the reassurance that your return has been filed correctly by tax experts and you get the added bonus that any CIS rebate is your pocket as soon as HMRC process it. Get started

Record keeping

Things will be a lot easier at the end of the tax year if you keep good records on all your income and outgoings, including the following:

• CIS remittances showing income and tax paid
• P60s or P45 if you have been employed
• Receipts for expenses you have incurred
• Records of any property or investment income
• Details of benefits claimed, such as Job Seekers Allowance

Report any changes to HMRC

Don’t forget to let HMRC know if you change the way you operate (for example you change from a sole trader to a limited company), change your address or stop trading.