CIS For Contractors (Employers)

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CIS Contractor Helpful Information

If you or your business operates as a contractor under the Construction Industry Scheme (CIS), you need to register for CIS before you take on any subcontractors. You must check that they should be working as a subcontractor and not an employee. Businesses can be fined for getting this distinction wrong.

You also need to verify the status of your subcontractors as either registered for CIS, not registered for CIS or  if they have ‘gross payment status’. This determines the rate your deduct from their gross monthly pay:

  • Registered for CIS – 20% deduction
  • Not registered for CIS – 30% deduction
  • Gross payment status – 0% deduction

Gross payment status doesn’t mean that they are exempt from paying National Insurance and income tax. It means that they will pay it at the end of the financial year, instead of monthly.

The calculation is worked out excluding the costs of materials, consumables, plant hire, fuel and VAT. All the deductions you take from subcontractors pay must be paid directly to HMRC every quarter.

You must also:

  • make these payments in the same way as you pay PAYE and Class 1 National Insurance for your existing employees.
  • provide a monthly return to HMRC with details of all the payments you have made to CIS subcontractors.
  • keep full records of these payments, including any deductions and VAT.

Warning: There are substantial fines for missing your monthly return deadlines, incorrect paperwork and late payments.

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CIS Contractor Payments

It is now mandatory to file your CIS returns online. To do this you need to register with HMRC’s CIS online service. This is free to use and each step is explained clearly, with all the information you need to complete the form listed at the beginning. However, you may prefer to use commercially available CIS software. Details of both these methods are available from HMRC.

  • Your CIS payment returns must reach HMRC by the 19th of every month, giving the records for the previous tax month. For example, the return for the tax month of 6th June to 5th July must be with HMRC by 19th July.

  • There is currently a £100 penalty for just being one day late filing your return. Two months late carries a fine of £200. By six months this has escalated to £300, or 5% of CIS deductions, whichever is bigger. After 12 months, the same amount is added to your penalty total. In extreme cases, HMRC can enforce a maximum late penalty of the higher of either £3,000, or 100% of the CIS deduction amount.

  • If you are a registered CIS contractor, you need to make a CIS return every month.

  • If you have not made any CIS payments to subcontractors that month, you should still provide a ‘nil return’ to say you have made no payments.

  • If you have underpaid or overpaid a subcontractor, you may be able to pay them more or less next time, in which case you do not need to inform HMRC. However, you must always state on your return the amount you have paid out.

  • You should always check your figures carefully, but if you find that you have made an error recording figures on your CIS return, you should inform HMRC as soon as possible.

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For further Tax information, please follow the links below:

  • HMRC Tax Office

  • Income Tax includes:
    What is income tax?
    How is Income Tax calculated?
    How much income tax do I need to pay?
    Income Tax Allowances
    Income Tax Rates and Taxable Bands
    How do I pay income tax?

  • Tax Codes includes:
    Where do I find my Tax Code?
    New Tax Codes
    What does my tax code mean?
    Different Tax Codes
    More than one job
    Emergency Tax Codes

  • Emergency Tax Codes includes:
    What is an Emergency Tax Code?
    What does an emergency Tax Code look like?
    Why do I have a BR/ Emergency Tax Code?
    Can I get a Tax Refund if I have paid Emergency Tax?

  • Construction Industry Scheme includes:
    CIS For Subcontractors
    CIS For Contractors (Employers)

  • VAT (Value Added Tax) includes:
    What is VAT?
    When do I pay VAT?
    How much VAT do I need to pay?
    Do I need to register for VAT?
    How do I pay VAT?
    Can I claim VAT back?

  • Self Assessment includes:
    What is Self Assessment?
    Do I need to complete a Self Assessment tax return?
    How do I get a Self Assessment tax return form?
    How do I register for Self Assessment?
    Can I register for Self Assessment on behalf of a company or trust?
    What is a Unique Tax Reference number (UTR)?
    How do I get a Unique Tax Reference (UTR) number?
    How do I complete my Self Assessment tax return online?
    Can I complete my Self Assessment tax return on paper?
    Record keeping
    Self Assessment Tax return deadlines
    What if I submit my tax return late?
    What if I submit my tax return incorrectly?
    How is my tax calculated?
    Do I need to check my tax calculation?

  • National Insurance includes:
    What is National Insurance?
    What are the different types of National Insurance?
    Who pays National Insurance?
    What is National Insurance used for?
    Do your National Insurance payments affect your Pension and Benefits?
    How much National Insurance should I pay?

  • Stamp Duty Land Tax

  • Pension Tax includes:
    Do I have to pay tax on my pension?
    Do I have to pay tax on my state pension?

  • Corporation Tax includes:
    Who needs to pay Corporation Tax?
    How much Corporation Tax do I need to pay?
    How do I pay Corporation Tax?

  • Inheritance Tax includes:
    What is Inheritance Tax?

  • Capital Gains Tax includes:
    What is Capital Gains Tax?

More Info

Tax Refunds

For more information please see: