If you’re in the construction industry, you might have heard of CIS payroll – and if you haven’t, now’s the time to change that. As a core aspect of UK financial laws for contractors, getting to grips with CIS is a vital part of your tax and bookkeeping obligations. But if you’re not clued up on financial jargon, it can be pretty tricky to understand what it is and how you can comply.
We’ve put together this guide to make things simpler. Take a look at what CIS is, whether it applies to you, and how our team can help you ensure full CIS payroll compliance.
What Is CIS?
The Construction Industry Scheme (CIS) is a part of HMRC’s tax regulations. It specifically applies to construction contractors who hire subcontractors, and is valid across most sectors of the construction industry (including civil engineering, utility installation, and traditional construction works).
It also applies to non-construction businesses that have spent over £3 million on construction works in a 12-month period.
Essentially, CIS is a way of deducting tax from subcontractor salaries, which counts towards their year-end income tax and National Insurance (NI) contributions.
What Is CIS Payroll?
CIS payroll is the process of complying with HMRC’s CIS rules when paying your subcontractors. It includes the regular, repetitive tasks needed to deduct and report tax, all of which are carried out monthly.
At Angel Bookkeeping and Payroll Services, we provide trusted CIS payroll services. It’s our job to manage your subcontractor payroll so that you don’t need to worry, making tax compliance a breeze.
Speak to our team about our CIS payroll services.
Who Needs to Register for CIS?
You’ll need to register as a contractor with HMRC if you hire subcontractors for construction work, or if you’re a non-construction business that has spent over £3 million on construction carried out by subcontractors.
But what does ‘construction’ actually mean? HMRC is clear that CIS is applicable for construction involving both temporary and permanent structures, as well as any civil engineering works. This includes demolition, site preparation, alterations and decorating, repairs, and installing systems for heating, water, lighting, ventilation, and electricity. You’ll also need to follow CIS for subcontractors who clean buildings after construction works have taken place (including during a project and once it’s completed).
It’s important to note that construction businesses based outside of the UK that carry out works within the UK also need to comply with HMRC’s CIS.
There are a few exemptions to the CIS rules. You won’t need to follow the scheme if you solely carry out these construction-related jobs:
- Carpet fitting
- Architecture
- Property and land surveys
- Making or delivering construction materials
If you’re unsure of whether you need to follow CIS, reach out to our team, and we’ll be happy to advise you.
What Are Your CIS Obligations?
Once you know whether you need to comply with CIS, your next step is to register as a contractor with HMRC. You’ll then receive the details you need to follow for CIS, including your unique Pay As You Earn (PAYE) reference number.
Before paying a subcontractor, they’ll need to be verified with HMRC. To do this, you’ll need the contractors:
- Unique taxpayer reference (UTR)
- NI number for sole traders
- Their company name and company UTR for limited companies
- Nominated partner information, trading name, and the business’s UTR for partnerships
HMRC will then make sure the subcontractor is verified and let you know the rate of deduction to use when paying them.
When you’ve verified your subcontractors, make sure to comply with CIS by following these steps:
- Make the necessary deductions: Calculate and deduct the correct amount from your subcontractors’ payments based on their verification status (typically 20% for registered subcontractors and 30% if unregistered).
- Pay deductions to HMRC every month: Send the deducted amounts to HMRC by the 22nd of each month covering all deductions made in the previous tax month.
- File monthly returns: Submit a CIS return to HMRC every month, detailing all payments made to subcontractors, including deductions and cases where no payment was made.
- Maintain your records: Keep accurate records of all payments, deductions, verification details, and CIS statements for at least three years, ensuring they’re available if HMRC requests them.
Working with over 50 subcontractors? You’ll need to use commercial CIS software to comply with HMRC rules.
Our CIS Payroll Services for SMEs
Our team of qualified bookkeepers and payroll professionals can help you manage your CIS obligations. We take care of all the necessary work, providing reliable services to support your business’s monthly finances. Our CIS payroll services include:
- Verifying your subcontractors (and advising you on next steps for unverified subcontractors)
- Calculating your subcontractors’ tax deductions
- Calculating your CIS payments
- Submitting your monthly CIS returns on your behalf
- Creating and sending CIS statements to all subcontractors
- Ensuring you pay any CIS payments on time
By ensuring your legal compliance with UK tax laws, we make your to-do list shorter and your life easier. Our financial knowledge and attention to detail reduce your chance of costly CIS mistakes, too, so that you can steer clear of penalties from HMRC. Save money, time, and stress by working with our team.
Speak to Our CIS Tax Experts
If you’re a contractor navigating CIS, we’re here to help. With a professional, fully-qualified bookkeeping and payroll team, we’re trusted to deliver reliable and efficient CIS payroll services that comply with UK laws.
Want to learn more about our CIS tax services? Reach out to our team today, and we’ll be happy to schedule a free CIS payroll consultation.