Brisan Logo

Construction Industry Scheme

The UK Construction Industry Scheme (CIS) is a set of rules and regulations designed to ensure that contractors and subcontractors in the construction industry are paid correctly. This is an area of taxation where matters can quickly become complicated, and filing services exist to help manage these compliance requirements. Such services can provide support by ensuring that contractors submit all returns on time and accurately, helping them to avoid any potentially costly fines from HMRC.

The UK Construction Industry Scheme

The UK Construction Industry Scheme (CIS) is a set of rules and regulations designed to ensure that contractors and subcontractors in the construction industry are paid correctly. Under the CIS, contractors are responsible for deducting the correct amounts of money from their subcontractor’s wages, before paying them to HM Revenue & Customs (HMRC). This money is then held in trust by HMRC until it is due to be paid out.

The scheme was introduced in 2007 and has since been amended several times, most recently in April 2019. The aim of the scheme is to make sure that contractors pay their subcontractors accurately and on time, as well as making sure that taxes, VAT and National Insurance contributions are paid correctly. It also helps protect workers from exploitation.

Under the scheme, contractors must register with HMRC if they work with any subcontractors who do not have an employer’s PAYE reference number. They must also fill out a monthly or quarterly return form which records all payments made to subcontractors during that period, including details such as name, address and bank account details. The return form must be sent by post or online within 19 days of the end of each month or quarter. Contractors should keep records for at least three years after the date of any payment made under the scheme.

Subcontractors must have a Self-Assessment UTR (Unique Tax Reference) number before they can begin working with a contractor under CIS – this should be obtained beforehand from HMRC. They will also receive a Payment Statement Record when any deductions are made from their wages – this shows how much PAYE/NIC has been deducted as well as any other arrangements between contractor/subcontractor regarding tax liability. Subcontractors should always check these records carefully before signing them off as correct – if there have been any errors, they can contact either the contractor or HMRC for assistance in resolving them.

It’s important for both contractors and subcontractors involved in the Construction Industry Scheme understand their obligations under these rules – failure to comply with them can lead to significant penalties from HMRC, so getting up-to-date advice is always recommended.

Chris Kensington

Chris Kensington

Managing Director

tax accountants

Sarah Watson

SENIOR CLIENT MANAGER

Brisan Accountancy

Who counts as a contractor or subcontractor?

Under the UK’s Construction Industry Scheme, a contractor is an individual or business who pays subcontractors in the construction industry. This includes people who are employed on a self-employed basis, such as freelance builders and tradespeople, as well as businesses like construction companies and property developers. Similarly, subcontractors are those people or businesses who are paid to carry out building work for contractors.

BRISAN ACCOUNTANCY