Construction Industry Scheme (CIS) Payroll Services
CIS Payroll refers to Construction Industry Scheme Payroll. This is a term used in the construction industry when referring to contractors who pay subcontractors to perform work for them. The CIS Payroll sets the rules which contractors must follow regarding how they pay their subcontractors for this work. This scheme was developed by HM Revenue and Customs and it only applies to the United Kingdom’s construction industry. Other countries and territories have their own rules for construction and payments to subcontractors.
What is the aim of the Construction Industry Scheme (CIS)
When a contractor is registered under this scheme, they are supposed to deduct a certain amount of money from the payments that go to their subcontractors and then use that money to pay HM Revenue and Customs. This money is treated as an advance payment to cover the National Insurance and taxes that subcontractors must pay anyway. The government doesn’t want subcontractors to handle these payments because they’ll often stiff the government out of their rightfully deserved tax money. So, HM Revenue and Customs set up this scheme so that contractors would hold back money from the subcontractor’s paychecks and use that to pay their taxes for them.
Who does it apply to?
Traditionally, CIS Payroll applies to companies which provide construction services as their primary business model, such as contracting companies. But it is possible for companies that are not in the construction business to still need to adhere to the CIS Payroll. The general rule is that if any company spends over £1 million annually on construction within 3 consecutive years, then they must register under the scheme.
For example, if a banking company wants to build a lot of new branches and office buildings over the next 3 years, this means a significant amount of their annual budget will go toward construction operations. Because of this, CIS Payroll may consider them to be legally contractors if they’re regularly hiring other subcontractors to work for them.
Other non-construction entities which usually must register include:
Housing associations
Local authorities
Labour agencies
Other government agencies
A company that heavily involves themselves in the construction business must register themselves with HM Revenue and Customs. During the registration process, the company needs to specify if they are registering as a contractor or as a subcontractor. They also need to specify if they are just a self-employed person, limited liability partnership, company, or partnership.
There are different rules for each of these types of business entities regarding construction. These include:
self-employed individuals working as sole traders
partnerships
companies
limited liability partnerships (LLPs)
If you are a business that is not based in the United Kingdom but you are doing most of your construction work in the United Kingdom, then you still need to register as well.
Already registered?
If you are already registered for the current CIS Scheme you must provide Ontime CIS with your Unique Taxpayers Reference or UTR number. It is also the first 10 digits of any CIS card you may have.
If, however, you have not used your CIS status for some time you may have to call the CIS helpline on 0845 366 7899 to re-activate your status.
Registering for the first time
To apply for CIS for the first time you must call the HM Revenue and Customs Self-Employed line on 08459 154 515 and notify them that you are becoming self-employed through the CIS Scheme. They will then issue your UTR number to you through the post. This will then need to be activated by calling the CIS helpline as above
To register as a subcontractor you must have a National Insurance number. If you do not have one please contact the Department for Work and Pensions on Tel 0845 600 0643.
What Tax is deducted ?
Where you have a UTR number then the normal tax rate we deduct at source is 20%.
Where you don’t yet have a UTR number but can provide a National insurance Number then we deduct an emergency type rate of 30%. Any overpayment of tax will be refunded via your year-end tax return.
To find out if CIS Payroll applies to you or your business call us on 01908 299 331 or click here to use our online contact form.
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