- Construction Industry Scheme (CIS) for Contractors & Subcontractors
- Registration and verification
- Making Deductions from Payments
- Monthly Returns
- Useful Links About the Construction Industry Scheme
Construction Industry Scheme (CIS) for Contractors & Subcontractors
The Construction Industry Scheme (CIS for short) was extensively revised in April 2007 and will affect 200,000 registered contractors and 900,000 subcontractors in the UK. According to HM Revenue and Customs the Construction Industry Scheme:
“sets out the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry and certain other businesses.
Under the Scheme, all payments made from contractors to subcontractors must take account of the subcontractor’s tax status as determined by HM Revenue & Customs. This may require the contractor to make a deduction, which they then pay to us, from that part of the payment that does not represent the cost of materials incurred by the subcontractor.”
AGS Payroll offer a comprehensive CIS administrative package, which takes into account all the changes implemented last year by HM Revenue and Customs and makes the whole system much easier for contractors.
What Our Construction Industry Scheme Service Can Do For You
Here are the key elements of AGS’ Construction Industry Scheme service. We will:
- Register contractors with HM Revenue & Customs (HMRC) for the CIS scheme
- Verify your subcontractors with HMRC
- Produce monthly statements of payments & deductions
- Submit your monthly returns to HMRC
AGS Payroll has over 35 years’ experience in the payroll industry and are both conversant and currently work with companies under the Construction Industry Scheme. Make sure you comply with the legal requirements and get in touch with us today for a quote.
Get in touch with us today via our contact form or by telephoning our offices direct: 01948 710 528 and we can advise you on the Construction Industry Scheme.
Construction Industry Scheme (CIS) – Key information
Here are the key legislative requirements of the CIS scheme:
- The Scheme sets out the rules for payments made by contractors to subcontractors for construction work
- All payments made must take account of the subcontractor’s tax status as determined by HM Revenue & Customs (HMRC)
- The scheme includes: companies, partnerships and self-employed individuals
What are the main elements of the Construction Industry Scheme?
The new Construction Industry Scheme became effective from 6 April 2007. The main changes in the scheme are:
Registration and verification
- All contractors must register with HMRC for the Construction Industry Scheme
- A Contractor Scheme must be set up (and a PAYE Scheme for employees)
- Contractors must contact HMRC to ‘verify’ that each subcontractor is registered before they take each one on
- Subcontractors must register with HMRC
- Subcontractors are paid either gross or net (at standard rate of 20% or higher rate of 30%)
- HMRC tell the contractor during verification which treatment to use
Making Deductions from Payments
Under the construction industry scheme, contractors must make a deduction from the gross amount less cost of materials paid for by the subcontractor which they then pay to HMRC. The deduction rates for the new scheme are 20 per cent for subcontractors registered with HMRC for payment under deduction and 30 per cent for those not registered.
If a deduction is required, the contractor must:
- Calculate the deduction
- Make the deduction
- Record details of the payment, materials and deduction
- Make the net payment to the subcontractor
- Complete and give the appropriate statement of deduction to the subcontractor
Monthly Returns
Under the Construction Industry Scheme, contractors must make a complete return (including nil returns) every month to reach HMRC by the 19th of each month. There are financial penalties for failure to submit a return (including nil returns).
The return must show
- Details of all subcontractors
- Details of the payments made, and any deductions withheld
- A declaration that the employment status of all subcontractors has been considered. This means that the Scheme applies to workers who are self-employed under the terms of the contract, and who are not employees subject to Pay As You Earn (PAYE). This is called a Status declaration.
- A declaration that all subcontractors that need to be verified have been verified.
- Nil returns must be made when there are no payments in any month.
- Each month contractors must send payment for deductions they have made from subcontractors to HMRC Accounts Office (quarterly payments can be made where small deduction amounts are due).
Useful Links About the Construction Industry Scheme
- New Construction Industry Scheme (New CIS) – HM Customs & Revenue Site
- Construction Industry Scheme – what you really need to know – gov.uk
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Get In Touch With AGS Payroll – Today!
- By telephone: 01948 710 528
- By email: info@advantagegroupsolutions.co.uk
- Through our Contact Form