Self-employed individuals are not necessarily good with numbers or managing the financial aspects of business. Many people claim it is the money side of things that puts them off pursuing their passion in the freelance and business world. However intelligent or skilled a person is in other areas, any matter to do with monitoring income and expenditure or paying tax can prove too daunting. There are sectors where things are made that little bit easier so today I wanted to tell you about the Construction Industry Scheme (CIS).
What is the Construction Industry Scheme?
The Construction Industry Scheme sees contractors taking money straightaway from the payments due to their subcontractors. The contractors then pay this money directly to Here Majesty’s Revenue and Customs (HMRC). Effectively this equates to the subcontractor having made advance payments via the contractor towards their tax and National Insurance liabilities. Subcontractors don’t have to take part in this scheme but are well advised to do so as payments are taken at a higher level if they are not registered with the CIS. Contractors do not get a choice and must register with the government scheme. Contractors register and then manage their monthly returns and subcontractor verifications online.
Subcontractors are advised to check out cis claims services to ensure they are not worse off financially than they should be.
How to tell if you are a contractor for the purposes of CIS?
If you pay subcontractors for construction work you must register for the Construction Industry Scheme. Watch out if you have spent more than £3 million on construction in the last calendar year in which case you also need to register for the CIS.
If you do construction work for a contractor, you are a subcontractor and must register. You do not get a choice.
Bear in mind that you may be both a contractor in some circumstances and a subcontractor in others.
How is construction defined for the purposes of CIS?
To be honest, CIS covers most construction work including changes to permanent or temporary buildings or structures. It also covers civil engineering work on things like bridges and roads.
Does your work involve preparing a site by laying foundations and providing access works?
Are you involved in demolition or dismantling works?
Would you say you do building work?
Do you find yourself altering, repairing or decorating buildings or structures, whether temporary or permanent?
Are you responsible for installing heating, lighting, power, water and/or ventilation systems?
Perhaps you just clean after the carrying out of building works?
In all or any of these situations the CIS applies to you.
As ever in life there are exceptions where you do not have to register for the CIS as a contractor. These are based on the type of jobs you do or oversee. Architecture and surveying don’t count. Not does scaffolding hire with no labour. Carpet fitting is not included in the Construction Industry Scheme. The manufacture of materials used in building such as plant and machinery does not form part of the CIS. The transport and delivery of materials to construction sites is not included in the Construction Industry Scheme. Then there are pretty obvious exceptions such as canteens on building sites and so on. My advice would be that if you are in any doubt at all, check with an expert.