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The Construction Industry Scheme (CIS) is a UK tax initiative that mandates contractors to deduct tax from payments to subcontractors and submit it to HMRC. CIS targets the construction sector, promoting tax compliance and transparency.
HHM Chartered Accountants equips you with the knowledge and support needed to thrive in the competitive construction market. Let us handle the complexities of CIS so yo can focus on building your business.
The Construction Industry Scheme (CIS) is a UK tax scheme primarily affecting the construction sector. Under CIS, contractors are responsible for deducting tax from payments made to subcontractors and then remitting this tax to HMRC.
Subcontractors must register for CIS and can receive payments that include the deducted tax. CIS aims to combat tax evasion, ensuring subcontractors are tax-compliant.
HHM provides expert assistance with CIS compliance, offering the following services:
Registration Support: We help subcontractors and contractors register for CIS, ensuring they meet all requirements.
Tax Deduction and Reporting: We guide contractors in correctly deducting tax from subcontractor payments and handle the accurate reporting of these deductions to HMRC.
Verification Process: We assist with verifying subcontractors’ tax status and ensure compliance with the scheme’s rules.
Submission of Monthly Returns: We manage the timely submission of monthly CIS returns to HMRC, reducing the risk of penalties.
Compliance and Record Keeping: We emphasises record-keeping, helping clients maintain accurate financial records related to CIS.
Tax Planning: Our experts work on optimising tax planning within the CIS framework, reducing tax liabilities for clients.
By availing HHM’s services, businesses in the construction industry can effectively navigate the complexities of CIS, avoid penalties, ensure tax transparency, and benefit from expert tax compliance and planning
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CIS is a UK tax scheme targeting the construction sector. It requires contractors to deduct tax from payments to subcontractors and remit it to HM Revenue and Customs (HMRC).
Contractors and subcontractors operating in the construction industry in the UK must register for CIS to comply with its tax deduction and reporting requirements.
Under CIS, the tax deducted from a subcontractor’s payment is contingent on their HMRC registration status. There are two deduction rates: Registered Subcontractors face a 20% deduction rate (excluding VAT and material costs) if they’ve been verified by the contractor with HMRC, while Unregistered Subcontractors experience a higher 30% deduction rate (excluding VAT and material costs) until they are verified by the contractor. Contractors must verify subcontractor employment status with HMRC to determine the applicable deduction rate before making payments.
CIS penalties can range from financial penalties for late returns to potential legal consequences for deliberate non-compliance, making compliance crucial for businesses in the construction industry.
HHM ensures that businesses operating in the construction sector are fully compliant with CIS regulations, minimising tax liability, avoiding penalties, and optimising tax planning to enhance financial efficiency and transparency.
If you’re a subcontractor who has had tax withheld by a contractor under the Construction Industry Scheme (CIS), you’re eligible to seek a refund for any excess tax paid. However, the process for requesting a refund depends on the structure of your business:
For Sole Traders: If you are a sole trader, you can claim a refund by completing your Self Assessment tax return, which should detail your income, expenses for the tax year, and the total CIS deductions made by the contractor. Any overpaid tax will be calculated, and you’ll receive a refund for the surplus amount.
For Partnerships: If you are partnership, each partner should claim their respective share of CIS deductions on their individual Self Assessment tax returns. The partnership’s income, expenses, and CIS deductions should be allocated based on the profit-sharing agreement among partners.
For Limited Companies: Limited companies can offset the CIS deductions against their Corporation Tax liability. This involves including the total CIS deductions in the Company Tax Return (CT600) as a tax credit. If the deductions surpass the Corporation Tax liability, a refund can be requested from HMRC. Alternatively, these deductions can be used to offset any PAYE and National Insurance obligations owed by the company.
Irrespective of your business structure, maintaining accurate records of payments received and CIS deductions made by contractors is crucial. These records serve as evidence for your refund claim and demonstrate your adherence to CIS regulations.
