Construction Industry Scheme

Construction Industry Scheme Accountants Specialists UK

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    Construction Industry Scheme Accountants Specialists UK

    Galaxy Accountancy London is a specialized team of Construction Industry Scheme Accountants UK which helps contractors and subcontractors in construction sector. HMRC established the Construction Industry Scheme (CIS) to regulate tax payments for in the building sector in United Kingdom. With its complex rules and regulations, navigating CIS can be a challenging task, at Galaxy Accountants, we have extensive expertise in CIS registration, returns, and payments to ensure your financial compliance. It don’t matter your business is related to construction company, partnership, or self-employed individual, if you need help navigating the CIS scheme, please contact our Construction Industry Scheme Accountants UK today, or carry on reading to find out more.

     
    What is the Construction Industry Scheme (CIS)?
    The Construction Industry Scheme has been set up by HMRC to ensure subcontractors cannot evade tax within the UK construction industry and to protect them from false employment. Under the scheme, registered contractors deduct money from the subcontractor’s payments. This then goes directly to HMRC as advance payment towards the subcontractor’s National Insurance and tax. In short, HMRC established the Construction Industry Scheme (CIS) to regulate tax payments for contractors and subcontractors in the building sector.

    What are the benefits of CIS?
     Registering for CIS has several benefits, whether you are a contractor or subcontractor. Those include:
    • Improving cash flow. Contractors make a 20% deduction from the subcontractor’s invoice, instead of the 30% HMRC would deduct for unregistered subcontractors.
    • Spreading the cost of tax and National Insurance across the year. If you’re a subcontractor and work for a contractor, your monthly deductions will count towards your tax and National Insurance bill – so there’ll be no nasty surprises come year end.

    What does CIS cover ?

    CIS covers most construction work to:

    • A permanent or temporary building or structure
    • Civil engineering work like roads and bridges

    For the purpose of CIS, construction work includes:

    • preparing the site – for example, laying foundations and providing access works
    • demolition and dismantling
    • building work
    • alterations, repairs and decorating
    • installing systems for heating, lighting, power, water and ventilation
    • cleaning the inside of buildings after construction work
    Exceptions for CIS Work in UK
    You do not have to register if you only do certain jobs, including:
    •  Architecture and surveying
    • Scaffolding hire (with no labour)
    • Carpet fitting
    • Making materials used in construction including plant and machinery
    • Delivering materials
    • Work on construction sites that’s clearly not construction – for example, running a canteen or site facilities
     

    CIS Specialists Services for Registration as Constructors

    Due to its complex CIS rules, people could not understand how do you know if you need to register for CIS? According to HMRC, registration rules apply for the following:

    CIS Registration for Contractors 

     Registering for CIS as a contractor is mandatory if:-
    • You hire subcontractors: to carry out construction work on your behalf.
    • Your total expenditure on construction work exceeds £3 million within a 12-month period: regardless of whether construction is your primary business activity or not.
    Note:- If your company’s legal structure (sole trader, partnership, or limited company) doesn’t affect the registration requirement. Timing is crucial, as you must register for CIS before engaging your first subcontractor, rather than afterwards.
     
    Already registered as a contractor? 
    Then you have the convenience of accessing the CIS online service, where you can easily file your monthly returns or verify the details of a subcontractor. It provides a streamlined process for managing your CIS obligations and ensuring compliance with the scheme.
     
    What are Responsibilities for Contractors in CIS ?
    As a registered contractor for CIS, you have a below responsibilities:
    • Subcontractor verification: you must verify the registration status of subcontractors, which enables HMRC to determine the appropriate deduction rate. However, if the subcontractor has been included in any CIS returns filed during the current tax year or the two previous tax years, this verification step is not necessary.
    • Subcontractor deductions: when a deduction is applicable (i.e., the subcontractor does not have gross payment status), you, as the contractor, must calculate the deduction amount, make the net payment to the subcontractor, maintain comprehensive records, and provide a deduction statement to the subcontractor.
    • CIS monthly returns: contractors also have the responsibility of submitting monthly CIS returns to HMRC. These returns provide a detailed account of the subcontractors they have worked with, specifying the payments made and disclosing any deductions. The statement accompanying the return must also confirm that the employment status of subcontractors has been assessed appropriately and that all subcontractors have undergone proper verification.
    • CIS payments: each month, contractors are required to send on their CIS payments for the deductions made. Many contractors set up a separate holding account within their accounting system to keep the funds separate.

    CIS Accounting Services in London UK for Subcontractors

    Galaxy Accountancy helps your business  to register in CIS for Subcontractors:

    • If you’re a subcontractor, you’re not required to register, but you may face higher deductions from your payments if you remain unregistered. It’s also important to note that you only pay tax under CIS if you are self-employed – if you work as an employee and consistently receive work from the same contractor, you should have PAYE status. Employee taxes and National Insurance contributions are deducted directly from their pay before receiving it, are entitled to employment rights such as sick leave, and may not need to file a tax return.

    CIS Registration for Contractors and Subcontractors

    • In certain cases, businesses may both subcontract their services to others and hire subcontractors for their own projects. If you find yourself in this situation, it is advisable to register as both a contractor and subcontractor, adhering to the relevant rules and processes for each scenario.
    • To streamline the process of managing CIS invoices and deduction statements, our expert CIS accountants can help and advise on appropriate CIS accounting software. This combination ensures efficient handling of CIS-related paperwork and allows for quicker completion of administrative tasks – contact us today.

    What Are Construction Industry Scheme (CIS) Deduction Rates

    When it comes to how much tax is to be deducted, there are 3 eventualities though 20% is standard.

    The CIS deduction rates are:

    • 20% for registered subcontractors
    • 30% for unregistered subcontractors, providing a big incentive for new subcontractors to register
    • 0% when the subcontractor has ‘gross payment’ status – this means the contractor pays them in full and the subcontractor is responsible for paying all applicable tax and National Insurance on their income at the end of the year via their Self Assessment tax return.

    How to claim CIS Refund Online ?

    You can claim a CIS tax refund online if you’re a limited company subcontractor, or an agent of a limited company, and you’ve paid too much tax or National Insurance. To claim a CIS refund online, you’ll need;

    • Company name, phone number, and UK address
    • PAYE reference numbers
    • Company Unique Tax Reference number (UTR)
    • The estimated overpayment amount
    How To Cancel or Deregister From CIS

    If you have stopped trading or using subcontractors, you can contact the HMRC to deregister from CIS. You are required to update HMRC about any changes that may affect your CIS registration. This includes;

    • Changes to your address and business structure, or the death of a contractor
    • If you stop trading or using subcontractors
    • If you’ve stopped using subcontractors, contact HMRC to deregister from CIS. If this is a temporary change, you can make an inactivity request instead. Make sure you file monthly CIS reports until your cancellation request is approved.

    If you are working or have a business in a trade where the CIS applies, we are here to help. We can advise you on construction industry scheme accountants service with various factors and then assist with the record keeping and submissions. Simply use the enquiry form alongside to reach out for our support.