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 NI.
For more information visit the government website here
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 (30%) should also register then pay the lower rate (20%).
Before a contractor can make a payment to a subcontractor for work they must first verify with HMRC that that subcontractor is registered and how much tax to collect. The Grafter platform automatically does this for the client.
How does Grafter work with the CIS?
Any CIS jobs will be clearly shown in the app so you know up-front that tax will be deducted before payment is made to you.
When you apply for a CIS job on Grafter, you will need to provide your UTR (if you have one) and your NI number so that you are set-up and ready to be paid under CIS. You only have submitted these details once, they will be stored in your account for all future jobs.
When 'Accepting' a job offer, the Grafter platform looks up your details with HMRC's CIS service, to check whether you should pay 20% or 30% tax. Generally, if you are not CIS registered you will pay 30% but if you are CIS registered you will pay 20%. So it is worth registering for CIS. See information on how to register below.
Once the CIS look-up is complete, your Work Contract will show you the correct payment, per day, for the job after tax. It will also show how much tax the client will be paying to HMRC on your behalf.
When a client make a payment for a CIS job, they enter the time worked. The platform automatically calculates the amount you will be paid and the amount the client should withhold for CIS.
You will get CIS invoices for your work, with all the details of the payment including details of the tax paid, in your 'My Payments' page. The 'My Payments' page keeps track of all your payments so you can easily check how much tax you have paid through the CIS scheme on Grafter for your records.
Register for CIS to pay less tax up-front
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.