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Everything you need to know so you can deal with HMRC employment compliance and subbie payments like a pro.
CIS payment refers to payments made between contractors and subcontractors under the CIS.
Self-employed contractors pay their own subcontractors with their regular wages. CIS deductions go to HMRC. Then a report showing subcontractor payments is submitted.
Compliance has become more complicated; our service has evolved to better protect you and make your self-employed workforce compliant.
- Backed by a trade specialist accountancy practice
- Supported by industry-leading employment status experts
- Offering access to innovative products for tax and insurance
We guarantee that every main contractor has the tools to protect the status of their subcontractors.
With a unique set of compliance procedures, Sullivan White prevents HMRC from reclassifying your self-employed sub-contractors as employees. We remove any tax and NI liabilities and shield you from HMRC employment status investigations.
Historically – tradespeople moved from site to site depending on who had work available.
Simplicity – By eliminating many of the complexities of hiring employees, especially if they are only needed temporarily, contractors can better match workforces to workload.
Costs – The contractor saves money while paying the self-employed worker more since he chooses when and where he works.
HMRC take a simple view – if:
- You regularly engage self-employed sub-contractors without a written contract.
- You supply most of the plant, equipment, and materials
- You pay them a day or fixed rate
- The sub-contractor cannot demonstrate that they can make a loss as well as a profit or that they have an active portfolio of other clients
If HMRC deems these sub-contractors to be your workers rather than self-employed, you will be accountable for any unpaid tax and NI contributions, as well as penalties.
PAYE stands for “pay as you earn” when tax and National Insurance contributions are deducted from individuals at source.
If you’re a subcontractor, the key difference between CIS and PAYE is that you’ll pay a flat 20% tax to HMRC instead of the ‘correct’ amount determined by your tax code.
The Construction Industry Scheme, or CIS, is a statutory tax regime that all construction enterprises must follow to avoid penalties. Contractors utilise the Scheme to withhold money from subcontractor payments and pay HMRC and Customs. Tax and NI contributions are considered advance payments.
The contractor will get an invoice from the subcontractor once the job is finished to the required standard. His contract stipulates that if a task takes several weeks, it will be paid under a “draw-down” basis. They may also be paid on a “day rate” basis, which means they are paid in arrears, usually weekly but possibly fortnightly or monthly.
There is no distinction – in most cases, a self-employed worker in the construction industry must be paid through the CIS, or construction industry scheme.
Yes, if you work in one of the construction industry scheme’s assigned industry sectors.
Yes – but they must be verified with HMRC first and will have to be paid under the higher rate of deduction – at 30%.
Yes, if they follow CIS rules. Incorporated or unincorporated working entities are subject to the same rules. The only exclusions are charities, charitable trusts, and school boards or principals.
The scheme covers all construction work carried out in the UK, including jobs such as:
- site preparation
The UK includes UK territorial waters up to the 12-mile limit.
All builders must register for the scheme. Contractors must verify subcontractors’ authenticity before paying them and report any payments to HMRC on a regular basis.
CIS registration is not essential to work as a self-employed contractor in the construction industry, but if they do not register, contractors must deduct 30% of their subcontractors’ earnings instead of the customary 20%.
All subcontractors are entitled to a monthly payment deduction statement from their contractor and must complete an annual tax self-assessment.
Sullivan White is a gross payment sub-contract intermediary.
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