CIS Tax Links most frequently asked questions
What is CIS Tax?
CIS is not a tax. It is a scheme set up by HMRC to help regulate and monitor the taxation of individuals and companies in the construction industry. You can either be a subcontractor or a contractor (or in some cases both) under the scheme and the way you are affected by the scheme depends on your classification.
I am a subcontractor on the CIS scheme, what does this mean?
This means that your contractor, or the firm you undertake work for, will deduct 0%, 20% or 30% from your payment. The amount will depend on if your contractor has verified that you have applied to be a subcontractor with HMRC (20%), cannot verify your subcontractor status (30%) or you have applied for and been successful in receiving gross payment status (0%). You will be required to do a personal tax return at the end of the year which usually means you will receive a refund.
I am a contractor on the CIS scheme, what does that mean?
This means that you employ people to do work for you in the construction industry. You need to complete CIS monthly returns to report the payments to your subcontractors. You will need to deduct the correct amount of tax from each payment (i.e 0%, 20% or 30%) and pay them the rest. Should you not file your return by the 19th of the month, HMRC will issue you with a £100 penalty.
I am both a contractor and a subcontractor on the CIS scheme, what does this mean?
This means that you work for a client who deducts CIS from you (subcontractor) but you also employ other subcontractors to undertake work for you (contractor). This means that you will be being paid with a deduction of 0%, 20% or 30% as per above, but will be deducting 0%,20% or 30% from your subcontractors through your monthly returns as well. Any CIS suffered is offset against CIS deducted and therefore should be deducted £2000 from your payment from a client for CIS, but you only deduct £1000 from your subcontractors, there is no payment to make to HMRC and the excess can be used next month. Also if you suffered a deduction of £1000 and you deducted £1500 from your subcontractors, you would only pay £500 to HMRC – i.e. the balance.
How do I reclaim my CIS from HMRC at the end of the tax year?
To get hold of your CIS tax rebate, you will need to report the CIS suffered to HMRC. If you are a sole trader, you will be required to complete a personal tax return to reclaim any overpaid tax. Contact us at CIS TAX LINK as we pay our subcontractors from our own pocket and recover the funds from HMRC. If you are a Limited Company, you will need to report the CIS suffered on your PAYE scheme. At the end of the tax year you will need to request this from HMRC. HMRC will pay the difference between CIS suffered and any liability on said scheme. If you are both a contractor and a subcontractor, you will need to report the CIS suffered through your PAYE scheme and HMRC will deduct liability from the wages processed through the scheme and any CIS deductions made from CIS subcontractors throughout the year.