Construction industry scheme compliance

By Tolley

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

  • Construction industry scheme 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 Construction industry scheme overview guidance note.

For an in-depth discussion of contractors and sub-contractors, see the Contractors under the construction industry scheme and Sub-contractors under the construction industry scheme guidance notes.

Registering as a contractor for CIS

A contractor needs to register with HMRC when it first engages sub-contractors within the CIS. There are several layers of registration required, some of which the contractor may already have in place, depending on his circumstances. These are registration:

  • with HMRC
  • as an employer
  • as an organisation for the purposes of HMRC’s online services
  • as a CIS contractor
Registering with HMRC

This is usually done when a business starts up so is only relevant as part of the CIS registration process if the contractor is a new business that is not already registered with HMRC. A contractor starting up a new business can register with HMRC as an organisation and an employer all as part of the same process on the online registration page .

Registering as an organisation

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