The following Tax guidance note provides comprehensive and up to date legal information covering:
This Practice Note sets out the obligations imposed by the construction industry scheme (CIS) rules on sub-contractors, including:
the possibility of applying for gross payment status, and
The CIS was devised to limit the amount of tax lost as a result of sub-contractors in the construction industry under-declaring or failing to notify their chargeability to UK tax.
For an overview of how the CIS works, see Practice Note: Construction industry scheme—overview.
The scheme operates by requiring the withholding of tax at source at the point of making a contract payment, thereby reducing the risk of a subsequent default by the sub-contractor. For the meaning of 'contract payment' and detail on the amount of the payment which is subject to withholding tax under the CIS rules, see Practice Note: Construction industry scheme—contract payments.
Unless a sub-contractor successfully applies to receive payments gross, (for which it must satisfy three tests outlined below in the section: registering for gross payment), payments by a contractor to a sub-contractor will be made:
after deduction of tax at 30% if the sub-contractor:
has not registered with HMRC
has registered, but HMRC is unable to verify this because, for instance, the sub-contractor may have provided incorrect information, or
was registered for deduction at 20%, but HMRC cancelled this—this is relevant only in serious cases, such as fraud, or providing
**excludes LexisPSL Practice Compliance, Practice Management and Risk and Compliance. To discuss trialling these LexisPSL services please email customer service via our online form. Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason. Trial includes one question to LexisAsk during the length of the trial.
To view the latest version of this document and thousands of others like it, sign-in to LexisPSL or register for a free trial.
Existing user? Sign-in
Take a free trial
Take a free trial
0330 161 1234