CIS stands for the ‘Construction Industry Scheme’, which is an initiative implemented by HMRC to help construction workers better manage their annual income and taxation responsibilities.
Under CIS, contractors deduct money from a subcontractor’s payments and pass it on to HMRC. These deductions count as advance payments towards the subcontractor’s income tax and NI contributions.
As a contractor, you should register with the CIS if you pay subcontractors to do construction work, whether you’re a sole trader, in a partnership or own your own limited company.
When you pay subcontractors, you’ll usually need to make deductions from their payments and pay the money to HMRC. Deductions count as advance payments towards the subcontractor’s tax and National Insurance contributions. All you need to do is keep full CIS records including a copy of the monthly statements you give to your subcontractors, and we’ll work out the proper deduction rates and paperwork.
As a subcontractor, your contractor will make deductions from your pay and should give you monthly statements of the payments and deductions they have made.
We will use these to complete your Self-Assessment tax return to calculate whether you still owe any tax or National Insurance to HMRC or whether you are due a refund. The good news, is that once you’ve added the details of any reasonable business costs and expenses incurred during the work you have performed, you are usually due a refund!
In order to be paid via CIS you will need to be registered for self-assessment with HMRC before you can register for the Construction Industry Scheme. You can register for both systems by calling their helpline on 0845 915 4515.
To register as a subcontractor, you will need the usual personal information such as your National Insurance number, date of birth, registered address, etc. To register as a contractor, you will need the full details of your business entity.
Once registered, HMRC will send you a 10-digit Unique Tax Reference, or UTR. This is an important reference number that you will need to share with us, so we can deal with your finances on your behalf.