Construction Industry Scheme (CIS)

The CIS scheme was radically overhauled on 6 April 2007 when the old paper based scheme was replaced with a new paperless scheme. These changes left many caught in what seemed to be a series of pitfalls and penalties.

CIS applies to all businesses in the Construction Industry - builders, developers, contractors, plumbers, electricians, roofers, bricklayers, carpenters, glaziers and many other trades - in some cases it also applies to services like landscaping and cleaning. However it does not apply to professional services like Surveyors and Architects.

The CIS Scheme makes Contractors check the registration details of Sub Contractors they use, which may include deducting tax at the source from payments made to them.

Contractors must now complete monthly CIS returns due on the 19th of each following month otherwise they will be fined £100 for each month the return is late. Penalties can also apply for incorrect returns.

Employed/self employed?

Central to CIS is the issue of employment status - is someone working for you employed or self employed? There are strict rules to be followed for this and you should not just assume someone is self-employed. This must always be checked out and the responsibility for these checks lies with the contractor, not the sub-contractor. Regular reviews should be carried out by Contractors on the classification of each worker to ensure the self-employed status is correct.

Penalties and Back Tax

Regular inspections of Contractors’ records are carried out by HM Revenue and Customs. Where HMRC think that sub-contractors are being treated as self employed, penalties and a back tax bill will follow.

Look out for yourself

You can strengthen the self-employed status of workers by following some simple steps. For example drawing up a contract that reflects genuine working arrangements, these and many other steps, can be easily implemented.

We can help guide you through the CIS web and offer the following CIS services:

• Sub-contractor verification
• Calculation of deductions
• Preparation of payment statements
• Preparation and submission of monthly returns.