Should I register for the Construction Industry Scheme?

Where you are self-employed and work in the building or construction trade, then you must pay tax under the Construction Industry Scheme (CIS).

You must register as a subcontractor if you do construction work for a contractor. If you pay subcontractors for construction work, you must also register as a contractor. It is possible to be a contractor and subcontractor at the same time, for example you might do some construction work for a contractor but use your own subcontractor to help you finish the work.

What if you don't register as a subcontractor?

It is important as a new subcontractor in the construction industry to register for the CIS, otherwise your contractor will pay you as a non-registered subcontractor and deduct 30% CIS tax from your payments.

When you register with HMRC, they can grant gross payment status so no tax deductions are made, but this will not generally apply to a newly registered subcontractor. In most cases, HMRC will register you so tax will be deducted at 20%. As previously mentioned, if you don’t register, your contractor must deduct tax at the rate of 30%.

As well as registering with HMRC as self-employed, an additional step is needed to register for CIS. If you haven’t done this and do not have a Unique Taxpayer Reference (UTR), you can register as a new business for self-assessment and choose ‘working as a subcontractor’ and HMRC will register you for self-assessment and CIS at the same time.

On the assumption your contractor deducts tax at the standard rate of 20%, this 20% deduction should be included on your tax return as a tax credit and may lead to a refund becoming due to you, depending on your circumstances.

Other things to consider

You should also consider your VAT position and review whether the special Reverse Charge arrangements apply.

How TaxAssist Accountants can help

We love to work with both CIS contractors and subcontractors and can handle your books and record keeping requirements. We can also make sure all necessary registrations are completed, provide VAT advice and ensure your personal tax return is completed. We can also ensure all allowable deductions, expenses and claims are made to maximise your tax refund. Why delay? Contact us today on 0131 665 0771 or by using our simple online enquiry form.

Date published 22 Feb 2023 | Last updated 29 Oct 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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