CIS Registered with Subcontractors?

If you engage a contractor for work under the Construction Industry Scheme (CIS), it’s your responsibility to establish whether they’ll be employees on payroll (including PAYE and NIC deductions) or subcontractors, even if it’s for a one-off job.

 

If they are being treated as a subcontractor then you will be liable to operating them under the CIS scheme. This will involve possibly making a tax deduction at source and making monthly returns to HMRC.

 

It is important when engaging contractors for work under the CIS scheme that you ensure you operate the scheme as it can ‘catch out’ businesses who only engage a contractor for a short period or for the first time.

 

Contact us if you think you may need to register as an employer or a contractor.

 

A subcontractor can be either a company or an individual and includes most trades.
Before you can pay a new subcontractor, you’ll need to ‘verify’ them with HMRC. You can also do this via Xero or other approved accounting software.

 

Verifying Subcontractors

Make sure you have:

• your Unique Taxpayer Reference (UTR)
• the reference number for your HMRC accounts office
• your HMRC employer reference

 

You’ll also need your subcontractor’s:

• National Insurance number and UTR, if they’re a sole trader
• Company name, company UTR and registration number, if they’re a limited company
• Nominated partner details, trading name and partnership UTR, if they’re a partnership

 

Deductions

The sooner the better. Registering early will let you get used to any new software and processes well ahead of any filing deadlines.

HMRC or your software will tell you:

• whether they’re registered for the Construction Industry Scheme (CIS)
• what rate of deduction to use or if you can pay them without making deductions

 

The CIS deduction rates are:

• 20% for registered subcontractors
• 30% for unregistered subcontractors
• 0% if the subcontractor has ‘gross payment’ status – this must still be reported on a CIS Return

 

If you make deductions, you must give the subcontractor a payment and deduction statement within 14 days of the end of each tax month.

Find out more about paying subcontractors here.

 

Paying HMRC

You must submit CIS returns monthly with periods running from the 6th to the 5th of each month.

The CIS return must be prepared on a cash basis, based on the date when the subcontractor is paid, regardless of when any invoice was raised.

You must pay these deductions to HMRC – they count as advance payments towards the subcontractor’s tax and National Insurance bill.
Pay HMRC every month by the 22nd, in the same way as PAYE and National Insurance payments.

 

MATCH can help guide you through the process and answer any queries you may have. Get in touch today and we’ll be happy to assist.