We often have clients ask us to explain the Construction Industry Scheme to them, as it can be quite confusing if you haven’t had to comply with it before.
Table Of Contents
Construction Industry Tax
The Construction Industry Scheme (CIS) is a system for collecting tax from subcontractors in the building industry.
The scheme principally applies to mainstream construction work. However, businesses or organisations whose core activity isn’t construction, but have a high annual spend on construction, may also count as contractors and fall under the scheme.
Does CIS Apply To Me
You may have to comply to the Construction Industry Scheme if you are a subcontractor in the building industry or if you a contractor and hire subcontractors in the building industry.
If you are a subcontractor you will be “verified” by the contractor in order to see which CIS rate should be applied, there are three rates:
- 0% is applied for subcontractors that have successfully applied for gross status
- 20% is applied for subcontractors that have been successfully verified but are not registered for gross status
- 30% is applied for subcontractors that have not been successfully verified. This could be because the information supplied is not correct or subcontractor is not registered as self-employed.
The purpose of the Construction Industry Scheme is to ensure that tax evasion is minimised in the construction industry. The downside is there is a compliance burden for businesses.
By setting up your CIS administration process and procedures early and using a good CIS software product it can minimise the stress of complying with the system.
Futher information on CIS can be found on the GOV website: https://www.gov.uk/topic/business-tax/construction-industry-scheme or as specialists in CIS we would be happy to answer any of your questions…