What is CIS
CIS stands for Construction Industry Scheme – it’s a special system that HMRC have set up for the construction industry.
The Construction Industry Scheme (CIS) applies to contractors, subcontractors and any organisations that have a high annual spend on construction, even if their main work isn’t in the industry. If your business is involved in construction, you may need to register with HMRC under CIS.
Many trades such as builders, plumbers, electricians etc can find themselves agreeing to do work for a contractor. This can mean that, as you will be classed as a sub-contractor, you will end up having a CIS tax deducted from the invoice you issue to your customer – the contractor. There are different levels of tax that a contractor is obliged to deduct, and if you are correctly registered with HMRC, this tax will be less than if you’re not. This deduction needs to be claimed back on your self assessment tax return if you’re an individual or partnership, or can be offset against payroll deductions of employees if you’re a Limited Company.
You can be both a Subcontractor and a Contractor!
If you’re operating as both a subcontractor and a contractor, it can get very confusing, so don’t get caught out – it’s cheaper to let SC Bookkeeping Services keep you compliant than to pay the penalties that HMRC so readily pass out to those that fall short of complying correctly.