Construction Industry Scheme was set out by HM Revenue & Customs (HMRC) to cater for self-employed contract workers in the construction industry. As a result of the amendment made to section 44 of the Income Tax (Earnings & Pensions) Act there are now stricter rules surrounding the employment status of contractors, with the burden of proof over a lack of supervision, direction or control now resting with the agency. Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments and pass it to HM Revenue and Customs (HMRC). The deductions count as advance payments towards the subcontractor’s tax and National Insurance. Also, contractors must register for the scheme while subcontractors do not have to, but deductions are taken from their payments at a higher rate if they’re not registered. But the high side of CIS is that it includes not only the typical building and other civil engineering works but also the repairing, decorating, site clearing, and installing power systems.
Who are the Contractors and the Subcontractors?
The Construction Industry Scheme or CIS applies to both contractors and subcontractors in the construction industry. There are different terms and conditions for an individual, a firm or a company to know whether they belong to the contractors or subcontractor’s category.
- You will be qualifying as a contractor if you have subcontractors under your firm or company’s name, another is if you spend or disburse over £1 million on construction within three-year period.
- You will be qualifying as a subcontractor if you finished work on a project under the employment of a contractor.
What is CIS Payroll Services?
CIS payroll refers to the payments made between contractors and subcontractors under the government’s Construction Industry Scheme or CIS. Contractors and subcontractors may encounter CIS payroll service companies through the course of their professional lives. CIS Payroll services protect and secure contractors and subcontractors alike who seek to ensure HMRC rules relating to CIS are followed correctly.
What does CIS Payroll Company Offers?
CIS Payroll Services may include but not limited to:
- Registering contractors for the CIS scheme with HMRC
- Verifying subcontractors with HMRC
- producing statements of payments & deductions on both monthly and quarterly basis
- Completing the monthly return and submitting it to HMRC
- Offering general advice concerning all aspects of CIS
To conclude, the Construction Industry Scheme has numerous implications for both contractor and subcontractor payroll. Being physically involved in the construction industry often makes you eligible for CIS, although this still goes back depending on the nature of your work and the relationship through which you employ or are employed. Depending on whether you qualify as a contractor, a subcontractor, or neither, CIS will affect you differently. Some contractors have the choice and decide to outsource their CIS payroll obligations to an external payroll company with CIS specialty for them to focus more on other important aspects of their business. At the end of the day, the choice is always yours to make.