In April 2007 HM Revenue & Customs changed the way subcontractors deductions and tax payments were made to the new Construction Industry Scheme (CIS). The scheme covers all businesses and concerns that work in the construction industry.
All contractors and subcontractors in the building industry must be registered with HMRC: whether you are self-employed, a partnership or a company including those acting as both contractors and subcontractors.
We will advise you whether you or your company must be registered and if registered, we will guide you through the new legislation and make sure that the monthly returns are made on time using the online facility.
Once registered under the scheme all payments made to subcontractors must take account of the subcontractor’s tax status. The contractor may have to make a deduction from that part of the payment that does not represent cost of materials.
The process that the contractor must follow when engaging subcontractors:
Verify the employment status with HM Revenue & Customs of all subcontractors that are engaged in a contract of work;
Retain details of the subcontractor's UTR, National Insurance, company registration and Public Liability Insurance;
Calculate net payments due to the subcontractors recording the details of the payment, materials and deductions according to the verified status of the subcontractor;
Produce a monthly certificate/statement of deductions to the subcontractor;
Complete the CIS300 monthly return to HM Revenue & Customs and pay the amounts stated therein by 19th of the following month;
Missed deadlines will incur an automatic penalty of £100.