27th February 2017 Posted by - Alexander Accountancy
Construction Industry Scheme (CIS) tax is a method for collecting tax from subcontractors working in the building trade. If you’re a contractor employing subcontractors you are required to deduct tax from the subcontractor’s pay. This deduction is an advanced tax payment for the subcontractor that is paid directly to Her Majesty’s Revenue & Customs (HMRC). In some circumstances it is possible for you to be a contractor and subcontractor at the same time, so you should be aware of both types of CIS tax.
The normal CIS tax rate is 20%, but if a subcontractor is not registered with HMRC then 30% tax must be deducted. However subcontractor businesses with high turnovers can apply for Gross Payment Status which removes the need for any deductions.
Only the labour element is included in the calculation, so care must be taken when the paperwork is prepared to identify this on the invoice. It is the contractor’s responsibility to ensure the deduction is calculated correctly and the monthly CIS return filed with HMRC to avoid any penalties.
CIS suffered as a deduction is offset against PAYE Tax and National Insurance payable for limited companies, or self assessment tax for individuals. In the majority of cases too much tax is deducted resulting in an overpayment. This amount will need to be requested as a refund from HMRC or can be used to offset against other tax liabilities.
This is a specialist area of Alexander Accountancy due to David’s personal involvement in the construction industry. Plus as a company we have a solid track record and years of experience when it comes to the Construction Industry Scheme. For advice on CIS, call us now on 01283 743851 or email via in**@al*******************.uk
