CIS Contractor & Subcontractor Returns

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Construction Industry Scheme

Construction Industry Scheme (CIS)

The Construction Industry Scheme (CIS) regulations remain a complicated area of taxation, one that HMRC continues to focus its enquiries on.

Under the CIS scheme, contractors deduct money from a subcontractor’s payments and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and national insurance.

There is an obligation on contractors to register for the scheme, and while subcontractors do not have to register, deductions are taken from their payments at a higher rate if they are not registered.

The scope of work covered by CIS and the available exemptions are complex, and it is easy to fall foul of HMRC’s requirements. Filing CIS returns can also feel like an unnecessary administrative burden.

At PBATS, we have a dedicated team member who ensures our clients’ returns are completed correctly, on time, and in accordance with HMRC’s requirements.

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Construction Industry Scheme (CIS) update

The Construction Industry Scheme (CIS) is set to see updates that will reinforce the criteria for obtaining and retaining gross payment status (GPS).

Effective from 6th April 2024, the changes will impact individuals and businesses that are part of the CIS scheme and those who apply for or currently hold GPS:

  • Subcontractors will be required to demonstrate compliance with VAT obligations to be granted and maintain gross payment status.
  • Applications for CIS registration will be transitioned to a digital format.
  • The initial review of a gross payment status holder’s compliance will now occur at 6 months post-application, before returning to an annual review thereafter.
  • The update also broadens HMRC’s authority to immediately cancel GPS, particularly in instances where there is a reasonable suspicion of fraud related to VAT, Corporation Tax, Income Tax, and Pay as You Earn (PAYE).

Frequently Asked Questions

It is the contractor’s responsibility to report tax deducted and the subcontractor then declares this on his tax return.

Gross payment status allows subcontractors to receive their payments without CIS deductions. From 6th April 2024, maintaining GPS will require demonstrating VAT compliance, among other criteria. PBATS can guide you through the application and maintenance of your GPS.

Yes, all contractors are required to register with HMRC under the Construction Industry Scheme (CIS). This ensures that any tax deductions made from payments to subcontractors are properly handled in line with the scheme’s regulations.

Yes, sole traders working for a contractor in the construction industry may fall under the CIS. Your employment status will be as a subcontractor, which means tax deductions could be taken from your payments unless you have GPS.

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