DNS Associates provide accounting services exclusively for Construction Industry Scheme (CIS) subcontractors.

If you are a CIS subcontractor DNS Associates are definitely the best choice for you:

DNS supports accounting for the Construction Industry Scheme (CIS)

Can advise you on whether you fall into the subcontractor or employee status (or both)

Will verify you with Her Majesty’s Revenue & Customs (HMRC) on behalf of your contractor (if needed)

Shall keep your records in good order

DNS operate a “no foal no fee” guarantee and you pay our fee only if you are 100% satisfied.

CIS is a series of regulations for contractors and sub-contractors working within the UK construction industry. Basically it is a quirky tax that is specific to workers within the construction industry.

The Construction Industry Scheme (CIS) sets out the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry.

If and when you are verified as self-employed the payments by the contractor will be dealt with through varying types of deductions.

On the HMRC website CIS is introduced as follows:

The Construction Industry Scheme (CIS) sets out the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry.

CONTRACTOR PAYS SUBCONTRACTOR

When a contractor pays a subcontractor, the contractor withholds 20% of any subcontractor labour costs (Net). The contractor is required to pay this withheld balance over to HMRC on a monthly basis.

The subcontractor can reclaim the 20% withheld by the contractor. The subcontractor reclaims the amount from HMRC at the end of the tax year. In practice, the reclaimed amount is knocked off any tax owed by the subcontractor to HMRC.

The scheme is effectively a way for HMRC to use contractors to tax subcontractors up front

Under the rules of the Construction Industry Scheme (CIS), contractors can make either gross payments or payments under deduction to subcontractors for construction work

If you want contractors to make gross payments, you need to register with HM Revenue & Customs (HMRC).

This guide explains what you need to do if you are a subcontractor to make sure you get paid correctly when you work for a contractor. It also explains how the contractor will work out your pay.

VERIFICATION

Under the Construction Industry Scheme (CIS), contractors have to “verify” the subcontractors who work for them. This means checking your payment status with HMRC so they can pay you the right amount.

When you get a contract to do work covered by CIS, you will need to register with the scheme as soon as possible if you are not already registered. The information HMRC needs to register you depends on your employment status, but generally it will include your name, your business name, your business address and other details about your business.

You can also ask HMRC to record one trading name.

You will need to give similar details to the contractor as well. When they contact HMRC to verify you, HMRC will match up the information you have given them with the details you have given HMRC.

If you do not register – or if HMRC cannot verify you because you have not given the contractor the correct details about yourself – you could end up with a deduction from your payments made at the higher rate.

GETTING PAID: GROSS OR DEDUCTION

Under the Construction Industry Scheme (CIS), there are two ways of paying subcontractors – gross or under deduction.

If you are registered for gross payment, the contractor pays you in full without any deduction. So you will need to pay tax and National Insurance contributions (NICs) on this amount later through your tax return.

If you are registered for payment under deduction, the contractor takes off an amount (currently 20 per cent) before they pay you and they must pay this over to HM Revenue & Customs (HMRC).

You will still need to pay tax and NICs on your payments later through your tax return, but HMRC will set any deductions that have already been made from your payments against this bill.

GROSS PAYMENTS UNDER CIS

In order to ask HMRC to register you for gross payment, your business must:

Do construction work in the UK and be run largely through a bank account

Have a construction turnover, excluding VAT and the cost of materials, of at least £30,000 each year (more for partnerships and most companies)

Have complied with all its tax obligations

Before HMRC can grant you gross payment status so you can get paid with no deductions, you will need to show them that your business passes three tests:

That it carries out construction work – or provides labour for construction work – in the UK

That it is run largely through a UK bank account

That it meets the turnover test: HMRC will look at your business turnover from construction work for the 12 months prior to your application for gross payment status.

gnoring VAT and the cost of materials, your construction turnover must be at least:

£30,000 if you’re a sole-trader

£30,000 for each partner in a partnership, or at least £200,000 for the whole partnership

£30,000 for each director of a company, or at least £200,000 for the whole company

If five people or fewer control your company, it must have an annual construction turnover of at least £30,000 for each of these individuals.

COMPLIANCE TEST

You and any directors or partners in the business, or beneficial shareholders (where the company is controlled by five or fewer persons) must have submitted all tax returns and paid all tax due on time in the 12 months before your application. If HMRC has asked for any information about your tax affairs in that period, you will need to have given it to them.

You are allowed a few lapses or late payments in the 12 months prior. Check the HMRC website for more details.

Three late submissions of the Construction Industry Scheme (CIS) contractor monthly return, including “nil” returns – up to 28 days late

Three late payments of CIS/PAYE (Pay as you earn) deductions – up to 14 days late

One late payment of Self Assessment tax – up to 28 days late

Any employer’s end of year return made late

Any late payment of Corporation Tax – up to 28 days, including where any shortfall in the payment has incurred an interest charge but no penalty

Any Self Assessment return made late

Any payment not made by the due date, where it is less than £100

If HMRC agrees that you can be paid gross, you must declare your payments in your tax return at the end of the tax year.



CIS PAYMENTS UNDER DEDUCTION

If you do not qualify for gross payments, your contractor will make a deduction on account of your tax and NICs before they pay you. The standard deduction rate of 20 per cent applies if you have registered for CIS and your details have been verified successfully by the contractor.

If you have not registered for the Construction Industry Scheme (CIS) or the contractor could not verify you, they will have to make deductions at the higher rate of 30 per cent. You can claim credit for these deductions through your annual tax return.

Subsistence and travelling expenses count as pay, so they will be liable for deductions too. But VAT, the cost of materials and certain other costs like plant hire do not count as pay, so the contractor will exclude them when they work out how much to deduct.

At the end of the financial year, you will need to complete a tax return. HMRC will work out your tax and NICs bill and set any deductions you have had made against it. This will show whether you are due a refund or you need to make further payments.

If you are paid under deduction, make sure your contractor gives you monthly statements of payments and deductions. You can ask them for these if you get paid gross too. Keep these statements to help you fill in your tax return.

NOMINATING SOMEONE ELSE TO RECEIVE PAYMENT

If you choose someone else to receive payments on your behalf – like a gang member, workmate, relative or debt factor – they should also register with HMRC. This person is called your “nominee”.

If you are registered to be paid gross, the contractor will pay your nominee gross as long as the nominee is registered for gross. But if they are not, they will be paid under deduction – even if you are registered to be paid gross.

PAYMENTS UNDER CIS IF A SUBCONTRACTOR DIES

If a subcontractor dies, their personal representatives will receive any outstanding payments due.

f the subcontractor was registered to be paid gross, their personal representatives will be paid gross as well. If a liquidator, receiver or administrator is dealing with the subcontractor’s company affairs, any outstanding payments will be made according to the company’s tax status.

DNS supports PDF invoices for CIS. On our CIS invoices we show Net, VAT, CIS amount, and total Due after CIS.

The system builds up the balance owed to HMRC if you are a contractor and the balance due from HMRC if you are a subcontractor.

Some common expenses are:

Limited Company Formation Services

Minimising Tax Payouts

CIS Advice

Tax Returns for Limited Companies

PAYE and VAT services

Bookkeeping Services

Business & financial advice

Some common expenses are:

Company formation

Accountancy fees

Business travel and accommodation

Postage for business

Stationery for business

Business telephone calls

Mobile telephone and calls

Salaries

Employer’s NI contributions

Contributions to an executive pension plan

Business entertainment

Equipment purchased for business purposes

Motoring expenses using fixed rate allowances

Computer software

Technical books and journals

Certain professional subscriptions

Use of home as office

Company bank charges and interest