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Construction Industry Scheme - the basicsIntroduction
Contractors and subcontractors in the construction industry must comply with special taxation arrangements. The Construction Industry Scheme (CIS) was extensively revised in April 2007.
If you are a contractor, you must check the tax status of all new subcontractors with HM Revenue & Customs (HMRC) before making any payments to them. This is known as the "verification" process. Once you have completed the verification process you must then pay subcontractors either gross or net of a deduction, as specified by HMRC.
You must also submit a monthly return. If you are a subcontractor, you need to register with HMRC, otherwise higher-rate deductions will be made from your payments from contractors. However, you may be able to receive gross payments if you can pass HMRC's business, turnover and compliance tests.
Types of business covered by the Construction Industry Scheme
It's a good idea to check if the work you are carrying out is covered by the Construction Industry Scheme (CIS). If any part of a contract is covered by the scheme, then any payments made by contractors and received by subcontractors in relation to the contract must be made through it.
There are detailed rules outlining what comes under the scheme, but in general terms, payments for the following operations must be made within the CIS:
- demolition and site clearance
- tree felling
- earth moving, tunnelling and excavation
- preparing and laying foundations
- construction of or alteration to any permanent or temporary building
- construction of site facilities
- installation of pipes, drains, sewers or underground cabling
- construction, surfacing or repair of roads or driveways
- any internal cleaning or fitting work on buildings, including heating, lighting, ventilation, air conditioning, power supply, drainage, water supply, kitchens or bathrooms
- installation and repair of glazing, doors or shutters
- any painting and decorating
- finishing such as floor covering (but not carpeting) and locks
There are many other activities covered by the scheme and some activities are also specifically excluded.
Types of business covered by the Construction Industry Scheme
It's a good idea to check if the work you are carrying out is covered by the Construction Industry Scheme (CIS). If any part of a contract is covered by the scheme, then any payments made by contractors and received by subcontractors in relation to the contract must be made through it.
There are detailed rules outlining what comes under the scheme, but in general terms, payments for the following operations must be made within the CIS:
- demolition and site clearance
- tree felling
- earth moving, tunnelling and excavation
- preparing and laying foundations
- construction of or alteration to any permanent or temporary building
- construction of site facilities
- installation of pipes, drains, sewers or underground cabling
- construction, surfacing or repair of roads or driveways
- any internal cleaning or fitting work on buildings, including heating, lighting, ventilation, air conditioning, power supply, drainage, water supply, kitchens or bathrooms
- installation and repair of glazing, doors or shutters
- any painting and decorating
- finishing such as floor covering (but not carpeting) and locks
There are many other activities covered by the scheme and some activities are also specifically excluded. To check them out please use the link below
http://www.hmrc.gov.uk/new-cis/cis348.pdf
If you have any doubt whether the CIS applies to the work you are doing, it's a good idea to check with the HMRC Construction Industry Scheme Helpline on Tel 0845 366 7899. |
