Construction Industry Scheme (cis)
Registration All contractors must and all subcontractors should be registered with HMRC, particularly those subcontractors seeking to be paid gross, and before they can receive payments from a contractor. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS Subcontractors can apply to be paid either: • gross by the contractor (as tax certificate holders pre 04/2007) or • under deduction (as registration card holders pre 04/2007). New subcontractors when first starting work in the construction industry on a self-employed basis should register under CIS. To register, a subcontractor must contact the HMRC CIS Helpline on 0300 200 3210 and comply with all of the identity and business checks required. Where a subcontractor fails to register with HMRC, or give relevant information to a contractor, the contractor will be advised, on seeking to ‘verify’ their payment status with HMRC, that the deduction rate from the labour portion of the invoices is 30% (the highest deduction rate). In order to avoid similar punitive deductions the subcontractor should be encouraged to register with HMRC. Deductions made by the contractor are set against the subcontractor’s overall Corporation Tax, Income Tax and any NICs liabilities. It can be recovered from the subcontractor companies PAYE payments. Subcontractors registered under the pre-April 2007 scheme did not need to register again provided they, or their business, had either a: • construction tax certificate - CIS5, CIS5(Partner), CIS6, or • permanent registration card, CIS4(P), or temporary registration card CIS4(T) with an expiry date of 04/2007 or later. Verification A contractor must first ensure that the relationship with the subcontractor is one of self- employment using the Check Employment Status for Tax service (CEST). Assuming the service confirms that the subcontractor can be treated as self-employed, it is then necessary to check the registration status for CIS and then whether payment should be made gross or under deduction. A subcontractor is required to supply contractors with name, unique taxpayer reference (UTR) and National Insurance Number (if known). Since April 2017 contractors can only ‘verify’ online (prior to April 2017 online and by telephone) the status of a subcontractor with HMRC before payment is made. Exceptions to the verification process are outlined at https://www.gov.uk/what-is-the-construction- industry-scheme. Where a subcontractor is ‘verified’ as registered by HMRC, the contractor will be instructed to either make payments gross or apply the standard rate of deduction from all payments (20% from 6th April 2007). Where a subcontractor is not ‘verified’ as being registered by HMRC the contractor will be instructed to make a deduction at the higher rate (30%) from all payments. HMRC may also classify a subcontractor as higher rate if it has concerns about that subcontractors previous relationship with HMRC. No printing, copying or reproduction permitted. HMRC will supply a ‘unique’ subcontractor’s verification number (which is the same for each
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