If you are new to construction industry or you have been in the construction business, want to change from PAYE to CIS. This article will give you a clear understanding of the CIS.

What is CIS?

The CIS, which stands for Construction Industry Scheme, was enforced by HMRC in 1971. It was set up to protect construction workers from false employment and tax evasion. Under the scheme, contractors deduct money from their subcontractors pay to cover their tax and National Insurance contributions.

How CIS works?

It is necessary to sole traders who are in the construction business to register with CIS scheme. Otherwise, unregistered subcontractors tax will be deducted at 30% rate. Subcontractors who registered in scheme will be deducted at 20% rate.

If you have a company and decide to use a subcontractor who is CIS registered, it is your responsibility to account for their tax. If you are a contractor, you have to pay deducted tax to the HMRC for every month as it is counted towards the pay for the subcontractor and contributes to tax purposes.

Subcontractor needs to be registered, if:

• Preparing the site, e.g. laying foundations and providing access works.
• Demolition and dismantling.
• Building work.
• Alterations, repairs and decorating.
• Installing systems for heating, lighting, power, water and ventilation.
• Cleaning the inside of buildings after construction work.

Don’t need to, if:

• Architecture and surveying.
• Scaffolding hire (with no labour).
• Carpet fitting.
• Making materials used in construction including plant and machinery.
• Delivering materials.
• Work on construction sites that are clearly not construction, e.g. running a canteen or site facilities.

Do I have to submit my tax return?

Yes, you have to submit the tax return to claim the tax that your contractor paid to HMRC on behalf of you. The advantage of filing a tax return is that you can claim your personal allowances and expenses.

The expenses that you can claim on:

• Car and van expenses (proportional basis or simplified rate).
• Your own tools and safety equipment you wear for work.
• Builders Liability Insurance premiums.
• Accountancy fees.
• Telephone and internet costs.
• Travelling to work.

If you want a clearer understanding of the claimable expenses. Please check out the previous articles in the blog article section.