Abbey

Chartered Tax Advisers
Old Bishops' College
Churchgate
Cheshunt
Hertfordshire
EN8 9XP

T: 01992 642024

E: abbey@abbeyaccountants.com

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     Construction Industry Scheme (CIS)

Businesses and individuals carrying out construction work in the UK have to comply with the Construction Industry Scheme (CIS) the latest version of which came into force on 6 April 2007.

Historically, rightly or wrongly, the perception was and still is that the construction industry is rife with a micro cash black economy and the CIS scheme was designed to counter this.

All businesses, which include companies, partnerships and sole traders, that come under the scope of the scheme must register as either as a Contractor, a Sub Contractor or both if applicable.

A Contractor is a business that pays Sub Contractors for carrying out construction work.

A Sub Contractor is a business that carries out construction work for a Contractor.

Depending on the business status under CIS, when a payment is received by a Sub Contractor from a Contractor for construction work carried out, tax can be deducted at either 0% 20% or 30% by the Contractor and paid over to HM Revenue and Customs (HMRC)

What is meant by business status is the size of the business, the length of trading and the tax compliance position.  These factors will all be taken into account to determine which tax deduction rate applies.

Contractors submit monthly returns to HMRC and pay over to HMRC whatever tax has been deducted from the Sub Contractors during that month.

For the avoidance of doubt these tax deductions will be treated as payments on account towards the relevant Sub Contractor's overall tax liabilities.

There are numerous punitive penalties for failure to comply with the scheme and HM Revenue & Customs' powers to remove the gross payment status (0% tax deduction) for a Sub Contractor can result in adverse cash flow problems and possibly put the Sub Contractor out of business.

We deal with numerous building businesses both large and small and as a result have extensive experience of CIS and can advise on all aspects of the scheme.

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