Landlord obligations
May 4, 2023Authorised Accountants in the UK: A Comprehensive Guide
May 12, 2023
The Construction Industry Scheme (CIS) is crucial in the UK’s construction industry, impacting contractors and subcontractors. This comprehensive FAQ guide will answer the top 10 essential questions about CIS, helping you better understand the system and its requirements.
What is the Construction Industry Scheme (CIS)?
The Construction Industry Scheme (CIS) is a tax deduction scheme in the UK designed to reduce tax evasion in the construction industry. It ensures that contractors deduct a percentage from subcontractors’ payments and forward them to HM Revenue & Customs (HMRC) as an advance payment towards the subcontractor’s tax and National Insurance.
Who needs to register for CIS?
Both contractors and subcontractors in the UK construction industry need to register for CIS. Contractors must register to report their deductions to HMRC, while subcontractors need to register to have deductions made at the correct rate.
How does CIS affect contractors and subcontractors?
Under CIS, contractors are responsible for deducting tax at source from their subcontractors’ payments and submitting monthly returns to HMRC. Subcontractors must ensure they are registered under CIS to receive payments with the correct deductions.
What are the CIS deduction rates?
There are three deduction rates under CIS:
- 20% for registered subcontractors
- 30% for unregistered subcontractors
- 0% for subcontractors with Gross Payment Status
How do I register for CIS as a contractor or subcontractor? Contractors and subcontractors can register for CIS online through the HMRC website or by contacting the CIS helpline.
What is Gross Payment Status, and how do I apply for it?
Gross Payment Status allows subcontractors to receive payments without any deductions. To qualify, subcontractors must meet specific criteria, such as having a good compliance history with HMRC. Applications can be made online or by post using the appropriate form.
What are the monthly reporting requirements for contractors?
Contractors must submit a monthly CIS return to HMRC, including details of all subcontractor payments and any deductions withheld. This must be submitted by the 19th of each month, following the tax month in which the payments were made.
How does CIS impact tax returns for subcontractors?
Subcontractors must include the income received and any deductions withheld under CIS on their Self-Assessment tax returns. The deductions will be credited against their final tax liability.
What are the penalties for non-compliance with CIS regulations?
Failure to comply with CIS regulations can result in penalties, including fines for late or inaccurate monthly returns, non-payment of deductions, or non-registration. Contractors may also face penalties for not verifying subcontractors’ registration status.
Understanding the Construction Industry Scheme (CIS) is vital for contractors and subcontractors operating in the UK construction industry. This FAQ guide covers the top 10 questions about CIS, helping you navigate the system and ensure compliance with its regulations.
