Construction Industry Scheme – What You Need To Know
At McDade Roberts, we have a specialist knowledge of the construction industry and many clients in this area. We therefore help them with the Construction Industry Scheme on a regular basis. The Construction Industry Scheme (CIS) sets out special rules for tax and national insurance (NI) for those working in the construction industry. Businesses in the construction industry are known as ‘contractors’ and ‘subcontractors’. They may be companies, partnerships or self employed individuals.
The CIS applies to construction work and also jobs such as alterations, repairs, decorating and demolition.
Reporting Requirements - Monthly Returns
Contractors have to make an online monthly return to HMRC:
- confirming that the employment status of subcontractors has been considered
- confirming that the verification process has been correctly dealt with
- detailing payments made to all subcontractors and
- detailing any deductions of tax made from those payments
Employed or self-employed?
A key part of the CIS is that the contractor has to make a monthly declaration that they have considered the status of the subcontractors and are satisfied that none of those listed on the return are employees. HMRC can impose a penalty of up to £3,000 if contractors negligently or deliberately provide incorrect information.
There are a number of factors which must be considered and the decision as to whether somebody should be classified as employed or self-employed is not a simple one. From 6 April 2017 mandatory online verification of subcontractors has been introduced. McDade Roberts can help you with this and help you decide if a subcontractor is paid gross or net and whether a pay slip needs to be issued.
The whole system is backed up by a series of penalties. These cover situations in which an incorrect monthly return is sent in negligently or fraudulently, failure to provide CIS records for HMRC to inspect and incorrect declarations about employment status. Late returns under the CIS scheme also trigger penalties that can reach £1000’s.
How we can help
Please do get in touch if you would like further information about the CIS. In this blog we have only touched the tip of a complex iceberg so to avoid penalties and keep your business on the correct side of the law, you can outsource your CIS headaches to McDade Roberts. Contact us today for a no obligation chat.