Our tax preparation specialists tell you all about the HMRC scheme for construction contractors and subcontractors

At DSR Tax Claims Ltd, we know that working in construction is hard work, and that’s before you have to deal with your taxes. That’s why our experts want to help make life as easy as possible for you by sharing our specialist knowledge with you. So, whether you are wanting more information about VAT or need to know about charitable tax relief, our handy guides are here to help. All our information is based on HMRC sources, so you can rest assured that these guides are filled with helpful and accurate information.

What is the Construction Industry Scheme?

The Construction Industry Scheme, often referred to as the CIS, is a government scheme under which construction contractors deduct money from a subcontractor’s payments and pass it to HMRC. These deductions count as advance payments towards the tax and National Insurance which will be owed by the subcontractor. The scheme was introduced in order to cut down on what was perceived to be tax avoidance within the construction industry.

If you are a construction contractor you must register for the scheme. Subcontractors don’t have to register but they will have a higher rate of tax deducted from their payments if they don’t register.

Contractors who are registered with the CIS can use HMRC’s CIS Online service to file their monthly returns and to verify subcontractors.

Who is classed as a contractor or subcontractor?

If you pay any subcontractors for construction work or your business spends an average of more than £1 million a year on construction in any 3 year period (even if it doesn’t actually do any construction work itself), you must register as a contractor under the CIS.

If you do any construction work for a contractor, you can register as a subcontractor.

If you fall under both categories, you must register as both a contractor and a subcontractor.

What work is covered by the CIS?

The CIS covers most construction work. This includes work to a permanent or temporary buildings or structures as well as civil engineering works, such as road or bridge building.

The following are all classed as construction work under the CIS:

  • Site preparation, such as foundation laying or providing access works
  • Building work
  • Demolition and dismantling work
  • Installation of systems such as heating, ventilation, power, lighting, water and so on.
  • Alterations
  • Repairs
  • Decoration
  • Cleaning the inside of a building after building work has ended.

The following are not classed as construction work under the CIS so you don’t need to register if these are the only jobs you do:

  • Scaffolding hire (with no labour included)
  • Carpet fitting
  • Architecture
  • Surveying
  • Making materials used within construction, including manufacturing plant and machinery
  • Delivering construction materials
  • Work on construction sites which is unrelated to the construction industry, such as catering or facilities provision.

Do these rules apply if my business is based outside the UK?

If your business is based outside the UK, but it does construction work as a contractor or subcontractor inside the UK, the CIS rules still apply.

How can DSR Tax Claims Ltd help?

We know that setting up as a contractor or subcontractor can be pretty complex – there’s so much to think about and that’s before you start thinking about tax. Our friendly team of tax specialists at DSR Tax Claims Ltd are on hand to help make life easier for you. We’re the experts at identifying your maximum allowable expenses so call us on 0330 122 9972 – we’re the tax experts you can trust.