18 Aug Do I Need to Register for CIS?
If you pay sub-contractors to do building work for you and you are for example a:
• Labour Agency
• Gang Master
• Property Developer
You must register as a contractor with the Construction Industry Scheme (CIS).
You should also register even if you don’t do construction work, but you spend more than one million pounds a year on construction work, for example if you are:
• A Housing Association
• A Local Authority
• A Government Department
A contractor can be a sole trader, a limited company or a partnership.
There are exemptions from the scheme and these are:
• Architecture and surveying
• Carpet fitting
• Scaffolding hire (without labour)
• Delivering materials
• Work on a construction site, which is not construction, such as a works canteen.
CIS also won’t apply if the work is paid for by:
• A charitable trust
• A maintained school on behalf of the education authority
• Yourself, as a Sub- contractor doing work on your own property which is worth less than £1,000 excluding materials.
The Construction Industry Scheme enables contractors to deduct the payments due to the HM Revenue and Customs (HMRC) and pay them directly to the HMRC. These deductions are counted as advance payments towards your tax and national insurance as a sub-contractor. Although it is not necessary for you to register for the scheme, if you don’t, you will pay a higher rate of tax.
If you prefer to pay the HMRC yourself, without deductions taken by the contractor, you can apply for gross payments as a sub-contractor. If you qualify you then receive your payments without deductions.
However, you must pass three tests to qualify and these are:
• A business test
• A Turnover test
• A compliance test
The Business Test
The business test seeks to establish that your business is genuine and that you are carrying our construction work, or supplying labour for such work.
The turnover Test
The turnover test compares your net construction turnover in the 12 months preceding your application with an amount set down in law. The threshold of this amount varies according to:
• The type of business you have, whether it is a sole trader, partnership, or company
• The number of its participants
• Whether your main trading activity is construction work
The Compliance Test
The compliance test is to ensure that you have filled in the necessary forms and complied with the rules and regulations set out in the compliance test within the amount of time stated. In other words that you have sent in and paid any relevant taxes and national insurance contributions and made available any accounts or other documents which may have been requested.
If you qualify for gross payments. You will be paid for any work you do as a sub-contractor without deductions.
If you would like to know more about CIS or you want to register or apply for gross payments, SQK Accountants in Manchester can advise you on all your CIS matters. We aim to provide a first class service at an affordable price. Contact us by filling in the form on our contact page or telephone us on 020 8798 0657 today.