CIS stands for the Construction Industry Scheme, which is legislation that requires contractors to deduct money from a subcontractor’s payments and for those funds to be passed to HMRC.
What is the purpose of CIS payroll?
The scheme’s primary goal is to prevent the loss of revenue to HMRC from salaries not being correctly taxed.
Essentially, the scheme resolves any worries around subcontractors managing their own deductions and instead relies on the contractor to make payments on their behalf, covering National Insurance and tax.
How are contractors and subcontractors determined?
HMRC has outlined that you fall under the contractor label if you pay subcontractors for construction work or if your business spends £1 million or more a year on construction in any 3-year period.
As for subcontractors, HMRC defines it as someone who conducts construction work for a contractor.
If you fall under either of the categories, you can register here.
What work falls under the CIS?
CIS covers the vast majority of construction work to buildings/structures and civil engineering work such as roads and bridges.
There are a few exceptions such as architecture, carpet fitting and delivering materials, but the scheme is fairly comprehensive.
You can view the full list of work that is included and the exceptions here on the GOV website.
As a contractor, once you’re verified with HMRC they will tell you how much to deduct from a subcontractor’s pay.
The rates are as followed:
- 20% for registered subcontractors
- 30% for unregistered subcontractors
- 0% for subcontractors with ‘gross payment’ status
How can 12Pay by IRIS help?
We offer a CIS Module that can help you easily ensure compliance with the scheme.
The module is specifically designed to be used by contractors operating their payroll providing all the necessary tools to conduct deductions at various rates and submissions.
For more information on how our offering can help you, click here.