Construction Industry Scheme (CIS)
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CIS Payroll is a specialist payroll scheme set up by the government to help with the payment between contractors and subcontractors in the construction industry. The acronym CIS stands for Construction Industry Scheme, and was introduced in 1971 to combat serious tax evasion in the industry. Both contractors and subcontractors are likely to encounter CIS payroll at various points in their professional lives. CIS payroll can be done in house by an agency or contractor, or outsourced to an independent CIS payroll company such as Centurion Payroll.
What Is The Construction Industry Scheme?
The construction industry scheme, also known as CIS, was introduced by HMRC specifically for self employed subcontractors working within the construction industry. Under this scheme, agencies or contractors will deduct money from subcontractors wages, and pay this to HM Revenue & Customs, which count as advance payments for said subcontractors national insurance and tax. As a form of payroll for self employed subcontractors doing work for larger contractors, your CIS payments will be tallied up at the end of the tax year and deducted from the payments needed to be made when filing your tax return. The rules for CIS payroll usually mean that the contractor is obliged to withhold 20% (if you are registered with the scheme) or 30% (if you are unregistered) of said wages for these tax payments. Contractors in charge of paying their subcontractors will process their CIS payroll at the same time as their regular payroll, and a return is then submitted showing HMRC what has been paid to the subcontractor. There are some cases, in which a subcontractor has an exemplary tax record or their turnover is higher than average, where they will achieve “gross status” and will not be taxed.
Who Do CIS Payroll Services Apply To?
CIS payroll services apply to those deemed as contractors and subcontractors in the construction industry under government guidelines. A contractor refers to any person or company that pays subcontractors for construction work. It also applies to any person or business who does not primarily specialise in the construction industry, but has spent more than £3 million on construction over the course of the year since they made their first payment.
A subcontractor refers to anyone who carries out construction work in the services of a contractor, often these are self employed workers who are hired on a case by case basis to carry out jobs in the construction industry. There are exceptions to this however, as certain roles within the construction industry such as surveyors and architects are exempt. Contractors must by law register for the Construction Industry Scheme, whereas subcontractors are not legally bound to, though often their deductions are taken at a higher rate if they do not. People and businesses who fall under both categories are required to register. It is important to note that despite contractors withholding tax on payments made to subcontractors via the CIS payroll scheme, the subcontractors are still treated as subcontractors and not employees, and are not entitled by law to employment rights such as statutory sick pay, holiday pay, maternity/paternity leave, and enrolment in pension plans. However, there are government schemes in place to assist people enrolled in CIS who may need support.
Why Choose Centurion?
While CIS payroll can be done in house by contractors or agencies, it can be a complicated, difficult process that lots of contractors simply do not have the knowledge or time to navigate. Outsourcing construction payroll services to Centurion Payroll, an independent CIS payroll company, will not only save contractors time, but also ensure that their CIS deductions are paid correctly in full compliance with HMRC, and that their subcontractors and staff are reliably paid on time without any issues. Contact us today to see how our CIS payroll services can help you!
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