Construction Industry Scheme
MHC & CO
The Construction Industry Scheme (CIS) is a tax deduction scheme implemented by HMRC in the UK. If you're involved in construction work, understanding CIS is crucial to ensure smooth operation and avoid any tax-related issues.
Contractors
You are responsible for deducting a percentage (either 20% or 30%) from subcontractors' payments.
This deduction is considered an advance payment towards their income tax and National Insurance contributions.
You must register with HMRC for CIS before hiring subcontractors.
Sub-contractors
You may be registered with CIS, allowing you to receive payments without tax deduction at a higher rate (20%).
If not registered, contractors will deduct a higher percentage (30%) from your payments.
Registering with CIS allows you to reclaim deducted tax through your Self Assessment tax return.
Benefits of CIS Registration (for Subcontractors)
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Receive gross payment without tax deduction (at 20%).
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Easier to manage your finances and cash flow.
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May access certain contractual opportunities that require CIS registration.
Recall
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Ignorance of CIS regulations can lead to penalties for both contractors and subcontractors.
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HMRC provides resources and guidance on CIS.
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Consider seeking professional advice from an accountant if you have complex CIS queries.