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Contractors and CIS

Contractors and CIS

29 February 2024

The Construction Industry Scheme (CIS) is a set of special rules for tax and National Insurance for those working in the construction industry.

The Construction Industry Scheme (CIS) imposes special rules for tax and National Insurance on those working in the construction industry. Businesses, termed ‘contractors’ and ‘subcontractors,’ should actively consider the tax implications of the scheme.

Under the scheme, contractors must deduct money from subcontractor payments and remit it to HMRC. These deductions serve as advance payments toward the subcontractor’s tax and National Insurance. Contractors, encompassing sole traders, partnerships, or limited companies, meet specific criteria based on payments and construction spending.

New contractors must follow these rules:

  1. They must register for CIS before they take on their first subcontractor.
  2. They must check if they should employ the person instead of subcontracting the work. They may get a penalty if they should be an employee.
  3. Check with HM Revenue and Customs (HMRC) that their subcontractors are registered with CIS.
  4. When they pay subcontractors, they will usually need to make deductions from their payments and pay the money to HMRC. Deductions count as advance payments towards the subcontractor’s tax and National Insurance bill.
  5. They need to file monthly returns and keep full CIS records – they may get a penalty if they do not.
  6. They must let HMRC know about any changes to their business.
Source: HM Revenue & Customs Sun, 25 Feb 2024 00:00:00 +0100

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