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The Construction Industry Plan (CIS) is something that whoever manages the wage bill in the construction industry should be familiar. But we understand, there is a lot to consider when performing the pay (and it’s not easy), so if the CIS deductions are new to you, here is all you need to know.

What is the construction industry program?

The construction industry regime is a tax regime where entrepreneurs deduce money from their payments to subcontractors and transmit it to HMRC. These deductions contribute to the annual payments of the national tax and national insurance.

It was introduced in 1997 and updated in 2007 and 2014 to facilitate it. It was intended to be a means of promoting fiscal compliance in the construction industry, which is often based on contracts and subcontracting.

Who is affected by CIS diagrams?

The CIS implies both entrepreneurs and subcontractors, although it affects each in different ways. It is important to keep in mind that it can also apply to your business if you spend a lot of money under construction, even if you are not a construction company.

It is compulsory for entrepreneurs to register for CIS. The means that if you hire subcontractors to carry out construction work, or if your business has spent more than 3 million pounds sterling for construction within 12 months, you must register for the program.

CIS covers several types of businesses, from large companies to self -employed workers. They may not always be in the definition of a construction company. An entrepreneur could be a department of local authorities or a retail company if they hire construction subcontractors.

Who should register for CIS?

Entrepreneurs

Entrepreneurs who pay subcontractors for construction work must register for a CIS regime.

Keep in mind that as an entrepreneur, you must register for a construction industry program before taking subcontractors. You can do it online by registering as a new employer on Gov.uk.

Subcontractors

Subcontractors can register for CIS deductions, but it is not compulsory. Although it may not be essential, it is advisable to register as a subcontractor because you reduce your tax bill. Indeed

If you start as a subcontractor company or a single merchant, don’t forget that you need to get a single (UTR) of taxpayers, you can get it through self-assessment. Once you have a UTR, it must then be activated for CIS, online or via the assistance line.

What companies are exempt from CIS?

Certain types of construction industry companies do not have to register if they only do certain jobs. These include:

• Scaffolding rental (without work)
• Manufacturing materials used in construction
• Deliver building materials
• Provide site facilities such as catering
• Architecture and survey
• Adjusted carpets
• Work paid by a charity or confidence
• Work paid by a director organ or a leader of a school maintained on behalf of the local educational authority
• Work on the property of the subcontractor and worth less than £ 1,000 (excluding equipment), which requires contact with the CIS assistance line for exemption.
• For “renowned entrepreneurs”, CIS does not apply to payments for work on ownership (and not for sale or rent) intended for their own commercial use, or a construction contract of a value of less than £ 1,000 (excluding equipment), also requiring contact with the CIS assistance line.
• Direct work for a private owner (not an entrepreneur) is exempt, with full payments.
• Other advisory works beyond architecture and surveying, such as structural engineering calculations, designers and scientists, are also exempt.
• The decoration or minor modifications where the cost of construction works does not exceed £ 1,000, excluding construction materials, can also be eligible for the CIS exemption, subject to confirmation of the HMRC.

You can find more detailed information and see if your business is free from Gov.uk.

What are the responsibilities of entrepreneurs and subcontractors in the CIs?

Entrepreneurs

The first responsibility for entrepreneurs is to ensure that you are registered before using subcontractors on construction projects.

Entrepreneurs are also responsible for verification with the HMRC that a subcontractor is registered with CIS before paying them. This allows you to know how much deduction for the tax.

Remember that an unregistered subcontractor will be deducted by 30% while a subcontractor recorded by CIS will be deducted by 20%. CIS deductions apply only to the portion of payment of work. They do not apply to materials, VAT, factory rental, fuel or other expenses.

The entrepreneur is responsible for deducting these payments and sending them to the HMRC as a monthly return. These yields must include complete information on the subcontractor and the payments made to them. Entrepreneurs are also required to provide monthly statements to subcontractors within 14 days of the end of each month of taxation.

Subcontractors

Although registration for CIS is optional for subcontractors, and we know that doing so involves filling another form, but the lower tax rate is worth it.

It is the responsibility of the entrepreneur to make the real deductions of your invoices, but as a subcontractor, you must also keep copies of these payments for your own files.

Even if entrepreneurs are responsible for making tax deductions, you will always have to point out with precision all your CIS deductions on your self-evaluation at the end of the tax year. It is important to keep in mind that these files should be kept for at least 3 years.

Having a clear payment file will also help you if you need to claim a refund for excess deductions.

How does CIS have an impact on HR professionals and business owners?

If you are a business manager or a human resources manager in a construction firmcis will be part of your monthly tax workload and your invoicing.

But what does this really imply?

It is a question of ensuring that the correct deductions are carried out according to the tax state of the subcontractor as determined by HMRC. You provide monthly yields to HMRC showing these deductions, or by informing them that no return is due if this is the case in a particular month.

You will also offer your subcontractors to show monthly declarations to show that you make these deductions and payments within the framework of the CIS regime.

CIS compliance

Make sure that you follow compliance with the CIS program means that you and / or your subcontractors pay for the correct tax amount each month, avoiding any unpleasant surprises at the end of the financial year. It is also important to ensure that feedback is in time and precise to avoid being slapped with HMRC penalties.

Penalties for non-compliance

• Late return – HMRC will charge £ 100 if your CIS return is late for a day. This penalty increases over time. Here is a complete ventilation of the penalties for returns later than one day:
  • 2 months – £ 200
  • 6 months – £ 300 5% of CIS deductions to the declaration, according to what is higher
  • 12 months – £ 300 or 5% of CIS deductions to the declaration, according to the highest.
  • Later at 12 months – an additional penalty of up to £ 3,000 or 100% of CIS deductions to the declaration, according to the first possibility, can be applied. It is also important to note that a penalty can be canceled if the HMRC is informed that no subcontractor has been paid this month.
• Incomplete yield– missing or incorrect information on your CIS yields can cause penalties up to £ 3000.

In summary

The construction industry program is a system designed to promote compliance and clarity for entrepreneurs and subcontractors in terms of tax payment. Although it is compulsory for entrepreneurs, it is advantageous for subcontractors to register and obtain a tax reduction of 10%.

Do not forget to keep full files and stay up to date by providing information and payments to HMRC, as needed.

Rationalize the wage bill with the hero of employment

Staying in accordance with the construction industry program (CIS) does not have to be complex. With Employment Hero, CIS treatment is integrated into our fully integrated payroll system, which facilitates the management of verification, deductions and reports of subcontractors and reports in accordance with the requirements of the HMRC.

Our platform automatically manages CIS deductions, subjects monthly yields to HMRC and maintains up -to -date recordings, so that you can reduce the administrator, reduce errors and remain conforming with confidence.

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A system, all the job.