The Construction Industry Scheme (CIS) is a scheme that applies to contractors and subcontractors in mainstream construction work. It can also apply to businesses and organisations who have such a large annual spend on construction that they are deemed to be contractors in their own right.

The scheme originated in 2002 but was extensively revised in 2007.

Introduction

The scheme is a special set of rules set up for handling payments made by contractors to sub contractors for construction work.

If you business is involved in the construction industry either operating as a contractor or a subcontractor the likelihood is that you should be registered for the scheme.

Both the terms subcontractor and contractor are defined within the rules of the scheme and you would need to know when you would be working as a subcontractor and when you would be classified as a contractor.

A guide to determining your status will be issued at a later date.

Once you have determined what you will be, subcontractor, contractor, or both then you need to register with HMRC.

Subcontractors

When you obtain a contract to do work which is covered within by CIS then you will need to register as soon as possible if you have not already done so.

Call the HMRC CIS Helpline on 0845 366 7899 or register online at www.hmrc.gov.uk.

The information you will be required to give HMRC will vary depending on whether you are a sole trader, partnership or company. It will generally consist of your name, your business name, the business address and any other details about your business.

HMRC will then issue you with a Unique Taxpayer Reference (UTR) which you will need to keep to hand.

When you are contracted to perform any CIS work you will need to give all of the information you gave to HMRC to the contractor along with your UTR. This will enable the contractor to verify you with HMRC and confirm how they are to pay you.

Note – if you do not register or HMRC are unable to locate you on the system then you may end up suffering a higher rate of tax deduction on your invoice.

Contractors

If you are in the business of contracting construction work out to subcontractors then you need to be registered as a contractor with HMRC.

Phone HMRC as detailed above or register online and provide them with all your information.

You will then need to start verifying all of your subcontractors to establish how you are to pay them.

You need to verify a subcontractor with HMRC in one of the following ways:

Calling them – 0845 366 7899
Using the HMRC website – www.hmrc.gov.uk
Using Electronic Data Interchange (EDI) or other third party software

However you decide to proceed you will need to have the following information ready:

• The name of your business;
• Your UTR;
• Your Accounts Office reference;
• Your employer reference.

You will also need the following information about the subcontractor:

• Their business name or their personal name if they are an individual;
• Their UTR;
• The partners name if they are a partnership;
• Their National Insurance number if they are self employed;
• The company registration number if they are a limited company.

You will also need to be able to confirm that you have a signed contract in place or that you have formally accepted their tender for work.

HMRC will then check these details against the details they hold about the subcontractor, confirm that they have registered or not, tell you how to pay them and give you a verification number.

This has given you a brief look in to the world of CIS and what you have to initially do as a contractor or a subcontractor.

The next Accountancy Services Direct articles in this series “More about CIS” and “Even more CIS” will explain more about how to pay and get paid under CIS, what documents need to be produced, what tax needs to be deducted, how and when to pay tax to HMRC and submitting monthly returns to HMRC.

Should you wish to explore this subject in more detail then please do not hesitate to contact us at Accountancy Services Direct.

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