Whether you’re a contractor or a subcontractor, you may be wondering how to register for CIS. The Construction Industry Scheme (CIS) is an HMRC scheme that applies to businesses and self-employed workers within the construction industry. CIS makes it simpler to collect income tax from subcontractors within construction.
The key phrase here is self-employed’. Instead of employing full-time staff, construction companies typically hire subcontractors on a project-by-project basis. As these subcontractors are technically self-employed, they would not pay income tax or national insurance through Pay as You Earn (PAYE).
Instead, when you register for CIS, the contracting business deducts a percentage from the subcontractor’s fee and pays that amount directly to HMRC.
How to register as a CIS contractor
Businesses can register for CIS by visiting the Construction Industry Scheme government site. You’ll need to register for the CIS scheme if you intend to employ subcontractors at any point on any project.
Once you have declared that you will hire subcontractors in the future, you will receive further paperwork from HMRC with additional details and steps.
What happens after I register as a CIS contractor?
Once you have registered as a contractor, you’ll be able to engage the services of subcontractors. You must follow the CIS process when hiring subcontractors:
- Ensure that you correctly registered with CIS as a contractor.
- Make sure that the subcontractor should not be classed as a full-time employee instead.
- You should then make a check with HMRC to verify that your subcontractor is CIS registered.
- When you pay subcontractors through CIS, you will make deductions from their fee, which you will pay to HMRC. Currently, the standard CIS deduction rate 20 per cent for standard CIS subcontractors. However, HMRC will advise you of the correct rate when you go through the verification process above.
- Finally, you must keep thorough files and inform HMRC of any changes.
If you need help with registering, verifying subcontractors or calculating CIS tax deductions, then you should speak to a trusted accountancy partner.
How to register for CIS as a subcontractor
If you plan to subcontract in the construction industry, you should also register with the CIS scheme. You can register with HMRC as a subcontractor through the Government Gateway website or by calling the CIS helpline. You’ll need your national insurance number and any applicable company information, and should receive documentation from HMRC shortly after registering.
After CIS registration, you’ll be able to take construction work as a subcontractor. You’ll give the hiring company your personal details, and they should check with HMRC to verify that you are a CIS-registered subcontractor. If you have not registered for CIS, then larger-than-necessary tax deductions could be taken from your payments (currently 30 per cent).
The benefit of registering for CIS as a subcontractor is that you will receive credit for all tax you have paid under the CIS scheme so far that year when filing your tax return.
Can you get paid gross when you register as a CIS subcontractor?
There is another option. Subcontractors have the choice of selecting gross payment status this is an additional option when you first register with CIS. Gross payment status can apply to any of the following qualifying subcontractors:
- Sole traders whose turnover exceeds a threshold (currently £30,000 per year)
- A company or partnership in which each partner/director exceeds a threshold (currently £30,000 per year) or the whole partnership/company exceeds a higher threshold (currently £100,000 per year).
If you choose to register for gross payment status, then contractors will take zero per cent of your payment in taxes; you will pay all tax at the end of the year.
When registering, HMRC will check that you or your company passes these thresholds in order to register for gross payment status. Companies or individuals may choose to opt for this as, in many cases, the additional cash flow can benefit the company throughout the year, despite the additional tax responsibilities.
Need a helping hand?
CIS registration can be a confusing and potentially difficult process but is necessary to avoid HMRC fines. Whether you’re a CIS contractor or a subcontractor (some businesses may need to register as both!), hiring an accountant to advise your options and processes is a good idea. Get in touch with UWM today for expert advice.
