Construction industry scheme—contractors' obligations
Construction industry scheme—contractors' obligations

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • Construction industry scheme—contractors' obligations
  • Registering as a contractor with HMRC
  • Verifying employment status of sub-contractors
  • Verifying payment status of sub-contractors
  • Deducting tax from contract payments
  • Paying tax withheld to HMRC
  • Recovery of CIS under-deductions
  • Statements to sub-contractors
  • Monthly CIS returns to HMRC
  • Record keeping

FORTHCOMING CHANGE relating to construction industry scheme (CIS) abuse: HMRC is consulting on changes to prevent tax loss from the CIS. The consultation proposes three key changes: (i) a new power for HMRC to correct CIS deductions that an employer has provided in its employment payment summary return, (ii) simplification of the rules for deemed contractors so that construction spend is calculated on a rolling basis rather than a look back basis, and (iii) changes to the rules on deductions for materials so that only those contractors that have made direct purchases can deduct the cost of materials. The consultation also explores measures to promote supply chain due diligence in the construction sector. This was published following the decision announced at Spring Budget 2020 to legislate in Finance Bill 2020–21 to prevent non-compliant businesses from using the CIS to claim tax refunds to which they are not entitled. The consultation runs until 28 August 2020. See: Tackling Construction industry scheme abuse.

This Practice Note details the obligations imposed by the construction industry scheme (CIS) rules on contractors, covering the requirement to:

  1. register as a contractor

  2. verify the employment status and CIS payment status of its sub-contractors

  3. where relevant, deduct tax from payments made to sub-contractors

  4. pay the withheld tax and submit CIS returns to HMRC on a monthly basis, and

  5. preserve