Construction Industry Scheme, or CIS, is essentially a scheme that lays down the rules for the process of payments to subcontractors from contractors in the construction industry. The Construction Industry Scheme has provisions for national insurance contributions, income tax, and other deductions, which are usually made automatically from the subcontractor’s paycheck. Through CIS, the HMRC gets an upfront payment for national insurance and tax. This scheme is essentially designed to simplify the administrative burden on the subcontractors and streamline the contractors’ tax affairs.
If you work as a contractor in the construction industry, you would be required to register for the CIS. In this article, we will explore everything there is to know about CIS.
Who is covered under CIS?
Construction Industry Scheme covers most of the construction work that is related to any type of work around buildings. It can range from site preparation to refurbishments and decorations. There are certain exemptions too. If the architects and surveyors are not involved in the construction part of the project, they do not need to enrol in CIS.
How CIS works?
If your work as a contractor falls within the CIT remit, it is important to register yourself with the scheme. A contractor is one who has some subcontractors working for them or has a business that spends more than £1 million in a 3-year period.
Your first step in this process is to register as an employer with Her Majesty’s Revenue & Customs (HMRC). This can be done online, and you would be given a PAYE employer reference and an accounts office reference. This can then be used to register for CIS, which can also be completed online. After this, the deductions would have to be paid quarterly or monthly.
Although registration is not mandatory for subcontractors, they will be able to receive tax benefits after enrolling in the scheme. Through the CIS scheme, a percentage deduction is made according to the value of the labour of the subcontractor. This can be 30% if they are not enrolled in CIS and 20% if they are.
When you are registered with this scheme, the tax deductions are not made at the source. This makes this scheme useful for contractors who need cash to make the payments. If the subcontractors in your business meet the criteria laid out in this scheme and their gross payment status applications are successful, there will be no deduction from their paycheck.
Conclusion
If you have decided to invest in the CIS payroll services as a contractor, you have two options. You can keep the payroll services in-house. However, for that, you would need a payroll department that would be able to handle the workout. The other way is to outsource your CIS payroll to Shield Labour Solutions. We provide fully compliant payroll models to contractors so that they can pay the subcontractors in the most tax-efficient way. To find out more about Payroll Solutions at SLS Pay, contact us today!