CIS ― compliance

By Tolley

The following Employment Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

CIS ― compliance
Registering as a contractor for CIS
CIS returns and payment of tax
Notifying HMRC of inactivity
Correcting CIS returns
Record keeping
HMRC checks on CIS returns

The construction industry scheme (CIS) was devised to limit the amount of tax lost as a result of under-declarations or failures to notify chargeability by sub-contractors who came to work in the UK for relatively short periods without paying any tax.

The scheme operates to withhold tax at source at the point of payment, thereby reducing the risk of a subsequent default by the sub-contractor. Although, if the sub-contractor can prove he has complied with his tax obligations he is able to receive payments gross.

The scheme has undergone regular changes since its inception. The current regime came into effect on 6 April 2007.

For a summary of the CIS, see the CIS ― overview guidance note.

For an in-depth discussion of contractors and sub-contractors, see the CIS ― contractors and CIS ― subcontractors guidance notes.

As announced at Spring Budget 2020, the Government will introduce legislation 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 measure will allow HMRC to reduce or deny the CIS credit claimed on employer returns where the sub-contractor cannot evidence the deductions and does not correct their return when asked. It will also simplify the rules covering deemed contractors, clarify the rules on allowable deductions for expenditure on materials and expand the scope of the penalty for supplying false information when registering for the CIS. The Government will also publish a consultation on how to promote supply chain due diligence, including ideas for tackling fraud in