The Construction Industry Scheme
If you’re a company, partnership or a self-employed individual working in the building or construction industry, you may have to pay tax under the Construction Industry Scheme (CIS).
This tax deduction scheme refers to payments made from contractors to subcontractors (not employees, as these are covered by PAYE). Contractors deduct money from a subcontractor’s payments and pass it on to HMRC.
Do I Need to Register for CIS?
You must register with HMRC as a contractor if you pay subcontractors for construction work. If your business doesn’t do construction work but you spend over £1 million a year on construction over a 3-year period, you also need to register.
If you work for a contractor, you have to register as a subcontractor. In order to receive gross income from a contractor, a subcontractor must pass three tests:
Business Test – proving the business is considered construction work (for example, site preparation, demolition or decorating).
Turnover Test – £30,000 for sole traders, £30,000 for each partner in a partnership, or, at least, £100,000 for the whole partnership.
Compliance Test – taxation and documentation must be in order, and payments have to be on time.
How Can Gorilla Accounting Help?
Register you with HMRC
Help you avoid penalties due to late returns
Keep your accounts and records in order
Ensure payments are done correctly within the scheme
Ensure you’re up to date with any changes to CIS
Supply deduction statements to your subcontractors
As a contractor in the construction industry, you have certain regulatory obligations to meet – but you’re also busy growing your business, so why not let us focus on all the admin?