CIS ― compliance

Produced by Tolley
CIS ― compliance

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

  • CIS ― compliance
  • Registering as a contractor for CIS
  • Registering with HMRC
  • Registering as an organisation
  • Registering as an employer
  • Registering as a CIS contractor
  • CIS returns and payment of tax
  • Electronic filing
  • Sub-contractor payment statements
  • Late CIS returns and tax payments
  • More...

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.

Finance Bill 2021 includes legislation 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 (see Spring Budget 2020, p 97 (web) para 2.249 and Finance Bill 2021, cl 30, Sch 6).

HMRC launched on 19 March 2020 a consultation seeking views on whether changes to the CIS could reduce tax losses. The consultation document sets out a proposed new power to allow HMRC to correct the CIS deduction amounts claimed against in-year liabilities by limited company sub-contractors on employer returns, as well as changes to some of the CIS rules to clarify their meaning or expand their scope. It also introduces some proposals relating to construction supply chains and seeks views on whether they could help prevent tax loss.

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