What Is CIS?
The Construction Industry Scheme (CIS) is a form of tax for contractors and subcontractors, created by HMRC. The main aim of the scheme is to limit tax evasion within the construction industry, which includes such a large number of self-employed workers. In years gone by, construction workers were typically paid in cash and tax was not paid to HMRC on their earnings. The purpose of the Construction Industry Scheme is to reduce this problem.
The scheme applies to all contractors and subcontractors, whether they are sole traders, companies or partnerships, and although subcontractors are not obliged to register, deductions are taken from their payments at an increased rate if they do not. When registering, it is important to clarify whether you are a contractor or subcontractor because different rules apply to each.
Payment Deductions
CIS rules pertain to any payments carried out by a contractor to a subcontractor; contractors subtract money from their subcontractor’s payments and submit monthly returns to HMRC, who regard the deductions as advance payments towards the subcontractor’s overall tax and National Insurance. Contractors must also provide CIS statements to their workforce stating the amount of tax paid to HMRC.
CIS Penalties
For those under the Construction Industry Scheme, HMRC runs an extremely strict penalty regime, so it is very important for contractors to keep everything up-to-date and ensure that none of their returns are submitted late.
GEM CIS Services
GEM can provide expert support regarding the Construction Industry Scheme. This service includes registration and verification of contractors and subcontractors, submitting deducted payments to HMRC and distributing CIS statements to your workforce. GEM wants to help you avoid any penalty fines, making the process slightly less worrisome. If you have any questions or would like a quote, please don’t hesitate to get in touch.