Construction Industry Scheme (CIS)
Our team will help contractors to ensure that they always remain compliant, and that they follow the requirements of the Construction Industry Scheme.
What is the Construction Industry Scheme (CIS)?
Contractors working within the construction industry are required to register with the government run Construction Industry Scheme (CIS).
The scheme requires contractors to deduct money from subcontract payments, which are subsequently passed on to HM Revenue and Customs (HMRC). Subcontractors not registered on the government’s CIS scheme will have deductions taken at a higher rate.
Once contractors are registered on the government scheme, Oasis takes care of the rest, making all necessary tax deductions accrued under the CIS scheme and pay them on your behalf to HMRC
Not everyone who works in the construction industry is self-employed. If you work in the construction industry, you should consider your employment status in the same way as everyone else.
It is important to be clear that even though Oasis will pay you and issue you with a pay statement, you are not an Oasis employee and so will not be entitled to any associated employment rights.
Do all workers in the construction industry automatically pay tax under the CIS?
No – you should only pay tax under the CIS, if you are genuinely self-employed.
Contractors have an obligation to decide if their workers are employed or self-employed.
Whilst most contractors would no doubt prefer to take on workers on a self-employed basis (as this means less cost/responsibilities/paperwork etc.), self-employment is a question of fact, not choice.
In situations where a person works exclusively for one contractor and does not have the risks of running a business, then they are likely to be an employee, rather than self-employed – even if the work arrangement is only for a very short time, or they have an existing Unique Taxpayer Reference (UTR) or they provide their own small tools.
If you are regarded as an employee of the contractor, then income tax (and National Insurance contributions) will need to be withheld at source by the contractor under the Pay As You Earn scheme.
How do I know whether to register under the Construction Industry Scheme?
There are two components of the Construction Industry Scheme (CIS), one is being a ‘contractor’ and one being a ‘subcontractor’.
If you are engaging other self-employed workers doing construction work then you are a contractor and must register under the CIS .
As a low-income self-employed worker, it is more likely that you will be engaged, or taken on, by a contractor to perform some construction work. This will mean you are a subcontractor. If you are a subcontractor then you can choose whether to register under the CIS.
Gov.UK explains how you can register for the CIS as a subcontractor and what information you will need to be able to register. There are different methods depending on whether or not you have already registered as self-employed and if you are working for yourself as a sole trader or through a different trading entity, such as a partnership or a limited company.
Note that registration under the CIS is in addition to registration as self-employed for Self-Assessment, not instead of registering as self-employed. This means for those new to both self-employment and the CIS, there are two separate registrations. However, both can be done at the same time.
It is also possible to be both a contractor and subcontractor at the same time. For example, if Ryan, an electrician, is contracted by a local builder to carry out some work, then his work would fall under the CIS. If he himself subcontracted out some elements of his work to his electrician friend Jenny because he wanted to get the job done quicker, then he must also register as a contractor and pay Jenny under the CIS.
If you decide not to register under the CIS then the contractor must deduct and withhold 30% of the amount of your invoices for your work.