What is the Construction Industry Scheme (CIS)?
Under the CIS, Building and Construction contractors deduct tax at source from a subcontractor's payments and pass it directly to HM Revenue and Customs (HMRC). The deductions count as advance payments towards the subcontractor's tax and National Insurance.
Who should register for CIS
All building and construction contractors must register with HMRC for CIS and any subcontractors who don't wish to have deductions at the higher rate of deduction should also register.
Before a contractor can make a payment to a subcontractor for construction work they must first verify with HMRC that that subcontractor is registered.
How does Grafter work with the CIS?
Businesses who are CIS Contractors should:
- consider whether or not they need to verify the subcontractor with HMRC
- verify the subcontractor with HMRC if necessary
- make payment to the subcontractor either with a CIS deduction or gross where no deduction is required
If a deduction is required, the contractor must:
- calculate the deduction
- make the deduction
- record details of the payment, materials and deduction
- make the net payment to the subcontractor
- complete and give the appropriate statement of deduction to the subcontractor
If a client needs to deduct CIS they will advise you at job set up. You will need to provide your UTR to the client and to us so we can add that detail to your invoice.
If you are CIS registered you will be deducted a lower rate of tax so worth registering at https://www.gov.uk/what-you-must-do-as-a-cis-subcontractor/how-to-register.
At the end of the year you will have to account for your income to HMRC but as you will have paid some in advance through CIS deductions the amount of tax payable will be reduced and you might even be able to claim a refund.
Note: this information is for guidance only related to use of the Grafter platform and should not be considered as financial advice which should be sourced from a qualified accounting practice or other reputable source.