Construction Industry Scheme: understanding the building blocks
Do you need help with the Construction Industry Scheme? Accounting Technician Jessica Maddams explains that tax reporting within the construction industry can be more complex than in other sectors. So make sure you're on the right tracks and fully compliant with the rules.
In the construction sector, tax reporting can often be more of a headache. One of the reasons is the common use of subcontractors. If you're paying them to do construction work on your behalf, you're required to register as a contractor and deduct tax from the payments you make to them. You then send these amounts to HMRC as advance payments of the subcontractor's tax.
If, on the other hand, you do construction work for a contractor (and you're not on their payroll), you should register as a subcontractor with HMRC. If you choose not to do so, then the contractor or contractors who employ you can make larger deductions of tax from the amount they pay you than if you were registered.
If both of the above apply to you, then you should register as a contractor and a subcontractor for CIS.
The construction industry covers most construction work that is to:
- a permanent or temporary building or structure
- civil engineering work like roads and bridges
According to HMRC, for the purpose of CIS, construction work includes:
- preparing the site - for example, laying foundations and providing access works
- demolition and dismantling
- building work
- alterations, repairs and decorating
- installing systems for heating, lighting, power, water and ventilation
- cleaning the inside of buildings after construction work
There are some exceptions under the scheme. You do not have to register if you only do certain jobs, including:
- architecture and surveying
- scaffolding hire (with no labour)
- carpet fitting
- making materials used in construction including plant and machinery
- delivering materials
- work on construction sites that's clearly not construction - for example, running a canteen or site facilities
You must keep full records for CIS purposes and file monthly returns with HMRC, ensuring that any payments due are cleared by the date specified. Each subcontractor will need to be verified (check that they are registered for CIS) with HMRC before you make any payments to them.
The administration required in registering and arranging deductions can be complicated and time-consuming, but Page Kirk can complete all the necessary work on your behalf. We can ensure that you are working in the most tax-efficient way possible, so you don't over-pay HMRC.
Interested in finding out more? Contact our team today on 0115 955 5500 or email enquiries@pagekirk.co.uk.