How to Apply for CIS

The Construction Industry Scheme (CIS) is an essential framework for the construction sector in the UK, ensuring that tax is correctly deducted and reported. Both subcontractors and contractors must register and comply with CIS regulations to avoid penalties and ensure smooth operations. This article provides an in-depth guide on how to apply for CIS as a subcontractor and a contractor, along with the requirements for each.

Applying for CIS as a Subcontractor

1. Understand the Requirements:

• Subcontractors can be individuals, partnerships, or companies that perform construction work for a contractor.

• It is not mandatory for subcontractors to register for CIS, but registering ensures a lower tax deduction rate (20% instead of 30%).

2. Gather Necessary Information:

• National Insurance Number (for individuals)

• Unique Taxpayer Reference (UTR) number

• Business details (name, address, etc.)

• Bank account information

3. Register Online or by Phone:

• Online Registration:

  1. Visit the HMRC website.

  2. Sign in to your business tax account or create one if you don't have it.

  3. Navigate to the CIS registration section and follow the prompts.

• Phone Registration:

  • Call the CIS Helpline at 0300 200 3210 and provide the required information.

4. Verification and Confirmation:

• HMRC will verify your details and send a confirmation letter, including your CIS registration number and details on your tax deduction rate.

5. Compliance and Record Keeping:

• Maintain accurate records of all payments and deductions.

• Submit annual self-assessment tax returns, including CIS deductions.

Applying for CIS as a Contractor

1. Understand the Requirements:

• Contractors are businesses or organisations that pay subcontractors for construction work.

• This includes mainstream contractors and non-construction businesses that spend over £1 million on construction over a three-year period.

2. Gather Necessary Information:

• Employer's PAYE reference number (if applicable)

• Unique Taxpayer Reference (UTR) number

• Business details (name, address, etc.)

• Details of subcontractors you intend to hire

3. Register Online or by Phone:

• Online Registration:

  1. Visit the HMRC website.

  2. Sign in to your business tax account or create one if you don't have it.

  3. Navigate to the CIS registration section and follow the prompts.

• Phone Registration:

  • Call the CIS Helpline at 0300 200 3210 and provide the required information.

4. Verify Subcontractors:

• Before making any payments, verify your subcontractors with HMRC to determine the correct tax deduction rate.

• You can verify subcontractors online through your business tax account or by calling the CIS Helpline.

5. Deduct and Pay CIS:

• Deduct the appropriate amount from payments to subcontractors (20% for registered, 30% for unregistered).

• Pay the deducted amount to HMRC monthly.

6. Monthly Returns:

• Submit monthly CIS returns to HMRC by the 19th of each month.

• Include details of all payments made to subcontractors and the deductions taken.

7. Provide Payment Statements:

• Provide subcontractors with a payment and deduction statement each month, detailing the gross payment, cost of materials, and the amount deducted.

8. Record Keeping:

• Keep detailed records of all CIS transactions, including verification, payments, and deductions, for at least three years.

Filing Deadlines and Penalties

Monthly Returns:

• Contractors must file monthly CIS returns by the 19th of each month following the end of the tax month. For example, the return for payments made in June must be submitted by July 19th.

Payments to HMRC:

• The deducted amounts must be paid to HMRC by the 22nd of the month if paying electronically, or by the 19th if paying by post, following the end of the tax month.

Penalties for Non-Compliance:

• Late Returns: A penalty of £100 for late submission of the monthly return, increasing if the return is more than two months late.

• Incorrect Returns: Penalties for incorrect or false information on returns.

• Failure to Verify Subcontractors: Penalties for failing to verify subcontractors with HMRC, leading to incorrect deductions.

Conclusion

Registering for the Construction Industry Scheme is crucial for both subcontractors and contractors within the UK construction sector. Compliance ensures smooth operations, avoids penalties, and contributes to a fair and efficient tax system. By following the steps outlined in this guide and maintaining accurate records, you can navigate the CIS registration process and meet your tax obligations effectively. For detailed information and support, visit the HMRC website or contact the CIS Helpline.