Construction Industry Scheme (CIS) Guide & Exemptions?
Here at Sapphire, we understand that tax can be a complicated issue for many businesses. So, if you work in the construction industry and you are unsure about the CIS and its exemptions, we have put together this guide to make things clearer for you.
What is the Construction Industry Scheme?
In 2007 HMRC updated the existing Construction Industry Scheme which was originally introduced in 1972 as a tax evasion prevention measure.
Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments which are then passed on to HMRC. These deductions are used as advanced payments towards the subcontractors tax and National Insurance for the year.
Who classes as a contractor and subscontractor?
You will be classed as a contractor and should register for the CIS, if you pay a subcontractor for construction work or if your business does not carry out construction work but you have paid out more than £3 million in the 12 months since you made your first payment.
Subcontractors are those that carry out the construction work for a contractor.
If you do the following jobs, you do not need to register for CIS:
- architecture and surveying
- scaffolding hire (with no labour)
- carpet fitting
- making materials used in construction including plant and machinery
- delivery of materials
- work on construction sites that’s would not be classed as construction such as running a canteen or site facilities
Exceptions for contractors
If you are part of the CIS but are confused about the exemptions, don’t worry, we’ve got you covered.
CIS does not apply to you if your work is:
- Funded for by a charity or trust
- Paid for by a governing body or head teacher of a school maintained on behalf of a local education authority
- Or if the subcontractor owns the property and is worth less than £1000 excluding materials. In this event, you must call the CIS helpline in order to be entitled for an exemption.
CIS also does not apply if you’re a deemed contractor paying for:
- Work on property for your own business use
- Or, if a construction contract is worth less than £1000 excluding materials. Again, in this event you would need to call the CIS helpline in order to get your exemption.
If you’d like more information or advice on being part of CIS and the exemptions that come with it, get in touch today to speak to one of our experts.