There are only a limited number of exemptions to the CIS so to help here is a short article where we explain everything you need to know. Let's begin!
Construction Industry Scheme (CIS) FAQs
CIS (the Construction Industry Scheme) is the government-mandated anti-tax avoidance scheme for the construction ...
CIS (the Construction Industry Scheme) is the government-mandated anti-tax avoidance scheme for the construction industry, which includes trades like plumbing, gas engineers, electricians, builders and plasterers.
In this article, we answer some of the most frequently asked questions regarding the Construction Industry Scheme.
Does a limited company need to be CIS registered
The need to be registered for CIS is not dependent on whether you are a limited liability company, sole trader or partnership. It’s all about whether you are involved in using or being a subcontractor.
If you use subcontractors and are either involved in the building industry as your main business or use building services of more than £3m in a year if building isn’t your main business (if for instance, you are a housing association), you must register as a CIS contractor. It doesn’t matter if you are a limited liability company or not.
Visit the gov.uk website to find out more.
Can I check if a company is CIS registered?
There are three possible ways that a contractor can check if a subcontractor is CIS registered. You can directly use HMRC's CIS online service; you can call HMRC's CIS Helpline on 0300 200 3210; you can use your system that supports CIS directly, such as Xero, to electronically query the status of a subcontractor.
It’s worth noting that Powered Now provides full support for CIS (the Construction Industry Scheme) for both contractors and subcontractors.
Have you tried Powered now?
As a subcontractor, it is not your responsibility to check if the business you do work for is registered as a contractor, it’s their responsibility.
How to register for CIS as a subcontractor
You can register as a CIS subcontractor online by logging in using your Government Gateway credentials. You need the following information:
- Your business name
- Your national insurance number
- Your unique taxpayer reference number (UTR)
- Your VAT registration number if you are VAT registered
There are several benefits of registering. The first is that if any contractor you do work for checks on you, you will be registered. Otherwise, they might refuse to use you.
Allied with this is that if they do use you, at the worst they will deduct 20% from your labour, expenses and profit on materials. In addition, provided that your record with HMRC is good, you may qualify for “gross payment” where no deductions are made.
Finally, registering will help ensure that the tax credit due to you is recorded against you. There is nothing worse than having CIS deducted, and then still having to pay tax on that work when you already did so under CIS.
What is a Construction Industry Scheme registration number?
The number that you receive from HMRC when you register (as a contractor/subcontractor) is known as your construction industry scheme registration number. This is different from the Validation Number that contractors receive from HMRC when they validate a subcontractor.
It is also different from your National Insurance Number (NI Number) or Unique Taxpayer Reference (UTR) as it only has meaning within the Construction Industry Scheme (CIS).
What are the benefits of the Construction Industry Scheme?
This can be a hard one to swallow. CIS was introduced to tackle the “black market” in construction. Although you can argue that the beneficiaries are ordinary citizens that pay their tax, many people won’t see it that way.
The obvious beneficiary is HMRC – CIS is designed to make their lives much easier and make sure they collect tax from people that otherwise might be avoiding it.
At the heart of CIS is the notion that subcontractors, who are often self-employed one person bands, are the ones most likely to be dodging tax. At the same time contractors who use them are more likely to be substantial businesses known to HMRC and paying their taxes. So, CIS effectively puts the onus on the contractor to collect some tax in advance from the subcontractors.
Here at Powered Now, we have no opinion about the Construction Industry Scheme. The truth is, CIS is here to stay. Actually, we see our job almost like grief councillors. You have no choice but to deal with it, so let’s make it as easy as possible!
We would be more than happy to help! Contact our friendly team today.
Please note that the content contained in this article does not substitute any professional advice. The article is provided for general information purposes only.