Accountants for Construction Industry

Are you a contractor or subcontractor under CIS?

The Construction Industry Scheme (CIS) is a set of special rules for handling payments for construction work that contractors make to subcontractors. The scheme covers all ‘construction operations’ – construction work – carried out in the UK, as well as some other related work.

Blackstone Accountants offer services to both Contractors and Subcontractors.

When are you a subcontractor under CIS?

CIS uses its own special definition of the term subcontractor. So even if you don’t normally think of yourself as a subcontractor, you could be treated as one under CIS.

Under the rules of CIS, you’re a subcontractor if you agree to do construction work for a contractor. It doesn’t matter how you actually carry out the work – you could do it yourself, get your employees to do it, use your own subcontractors or make some other arrangement.

Subcontractors can be self-employed individuals, partnership business or trading as a limited company.

When are you a contractor under CIS?

Under the rules of CIS, you’re a contractor if:

• you run a business that engages subcontractors for construction operations – a ‘mainstream’ contractor
• you run a business that spends an average of £1 million or more a year over a three year period on construction operations – a ‘deemed’ contractor

Any type of business, including a company, partnership or self-employed individual, can be a CIS contractor. If you are contracted to work in domestic households and you engage subcontractors you are a CIS contractor and will have to operate CIS. However, if you’re a private householder you’re not a contractor, no matter how much you spend.

When should I charge VAT?

Whether you are a contractor or a subcontractor, you should register for VAT as soon as your taxable supplies exceed the VAT threshold (currently £85,000) within the last 12 months or less.

However you should be aware of the correct VAT rate to charge for the services you provide.

Standard rate VAT: VAT for most work on houses and flats by builders and similar trades like plumbers, plasterers and carpenters is charged at the standard rate of 20% - but there are some exceptions.

Reduced rate VAT: You may be able to charge the reduced rate of 5% for some types of work if it meets certain conditions, including: installing energy saving products and certain work for people over 60, converting a building into a house or flats or from one residential use to another, renovating an empty house or flat and home improvements to a domestic property on the Isle of Man.

Zero rate VAT: You may not have to charge VAT on some types of work if it meets certain conditions, including building a new house or flat and work for disabled people in their home, civil engineering work to develop a residential caravan park, approved alterations and substantial reconstructions to protected buildings, converting a non-residential building into a house or communal residential, building for a housing association, constructing certain buildings used by charities for a ‘relevant charitable purpose’, children’s homes, residential care homes, hospices, student accommodation, school boarding houses, armed forces’ accommodation, monasteries, nunneries and similar buildings.

What can we offer you?

Contractors: As a contractor, you are required to meet specific obligations under the scheme, including registering with HM Revenue and Customs (HMRC), checking whether your subcontractors are registered with HMRC, paying subcontractors, deducting tax and submitting monthly statements confirming these payments.

Subcontractors: If you are a subcontractor, your main obligation is to register with HMRC. You must also keep HMRC informed of any changes to your business such as changes to your business address, business name, business partners and other relevant information.

Services we provide for subcontractors:

• Register you with HM Revenue & Customs under CIS scheme
• Manage and organise your business records – From CIS Vouchers to builders merchant receipts.
• Prepare VAT returns(if applicable) and advise you on correct VAT rate to apply.
• Prepare your end of year self-assessment tax return and calculate your tax liability/refund where applicable.

HMRC will register you as a subcontractor under the CIS scheme and they will set you up to receive payments ‘under deduction’. This means contractors must make a deduction of tax at 20 per cent (30 per cent for unverified subcontractors) from the labour element of your invoices and pay it over to HMRC. However we can help you apply for " gross payment status" (subject to you qualifying HMRC eligibility criteria), which means you will receive payments without CIS deductions.

Contact us today for more information on working under the CIS Scheme. We have years of experience so allow us to build your path to the contracting trade.