Construction Industry Scheme (CIS) Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments and pass it to HM Revenue and Customs ( HMRC ). The deductions count as advance payments towards the subcontractor’s tax and National Insurance.
The Payroll Provider is fully qualified and experienced at handling all your companies CIS requirements. We will manage all deductions on your behalf, ensuring you have the peace of mind that all requirements are met.
CIS will apply to payments made by a contractor to a subcontractor. If the subcontractor passes three tests – known as the business, turnover and compliance tests – and registers with HM Revenue and Customs (HMRC), it will receive gross payments from the contractor.
Although the best position would be for the subcontractor to register for gross payments, if the subcontractor is not eligible because it fails one of the three tests it can still register with HMRC to ensure that tax is only deducted at the lower rate of 20% instead of the higher rate of 30%.
If the subcontractor then subcontracts its obligations under the contract with the original contractor to another party, it will become the contractor in respect of its relationship with that other party. The original subcontractor will then be required to apply CIS to payments it makes to that party. Therefore, the original subcontractor could be both a contractor and subcontractor for the purposes of the CIS rules.