Construction Industry Scheme (CIS)
Our team will help contractors to ensure that they always remain compliant and that they follow the requirements of the Construction Industry Scheme.
What is the Construction Industry Scheme (CIS)?
Contractors working within the construction industry must register with the government-run Construction Industry Scheme (CIS).
The scheme requires contractors to deduct money from subcontract payments, which are passed on to HM Revenue and Customs (HMRC). Subcontractors not registered on the government’s CIS scheme will have deductions taken at a higher rate.
Once contractors are registered on the government scheme, Oasis Umbrella takes care of the rest, making all necessary tax deductions accrued under the CIS scheme and paying them on your behalf to HMRC.
Not everyone who works in the construction industry is self-employed. If you work in the construction industry, you should consider your employment status the same way as everyone else.
It is important to be clear that even though Oasis will pay you and issue you a pay statement, you are not an Oasis employee and will not be entitled to any associated employment rights.
Do all workers in the construction industry automatically pay tax under the CIS?
No – you should only pay tax under the CIS if you are self-employed.
Contractors must decide if their workers are employed or self-employed.
Whilst most contractors would no doubt prefer to take on workers on a self-employed basis (as this means less cost/responsibilities/paperwork etc.), self-employment is a question, not a choice.
Even if the work arrangement is only for a short time, an existing Unique Taxpayer Reference (UTR), or they provide their small tools; an employee is more likely than a self-employed person if they exclusively work for one contractor.
If you are considered an employee of the contractor, income tax and National Insurance contributions (NI contributions) will be withheld at the source through the Pay As You Earn scheme.
How do I know whether to register under the Construction Industry Scheme?
There are two components of the Construction Industry Scheme (CIS), one being a ‘contractor’ and one being a ‘subcontractor’.
If you are engaging other self-employed workers doing construction work, you are a contractor and must register under the CIS.
As a low-income self-employed worker, it is more likely that you will be engaged or taken on by a contractor to perform some construction work. This will mean you are a subcontractor. If you are a subcontractor, you can choose to register under the CIS.
According to Gov.UK, you can register for the CIS as a subcontractor and obtain the required information. Different procedures are available if you have already registered as self-employed and work for yourself as a sole trader or through a different trading entity such as a partnership or a limited company.
In addition to registering as self-employed for Self-Assessment, registering under the CIS is required. This means that there are two separate registrations for those new to self-employment and the CIS. However, you can do both at the same time.
It is also possible to be both a contractor and subcontractor simultaneously. An example of a CIS is that if Ryan, an electrician, is contracted by a local builder to do some work, his work would be subject to the CIS. If he subcontracted some elements of his work to his electrician friend Jenny because he wanted to get the job done quicker, he must also register as a contractor and pay Jenny under the CIS.
If you decide not to register under the CIS, then the contractor must deduct and withhold 30% of the amount of your invoices for your work.