CIS Payroll is a specialist type of payroll introduced by the UK government to facilitate payment in the construction industry between subcontractors and contractors. CIS refers to the Construction Industry Scheme, which was introduced by the government in 1971 as a means of addressing and combating tax evasion in the industry. CIS Payroll is now an important part of the construction industry, and most people working within construction either have or will encounter it at some point during their careers. While CIS Payroll can be done in house by agencies and contractors, it is often preferable to outsource payroll to an independent CIS payroll company such as Centurion Payroll, where payroll is guaranteed to be reliable and compliant with HMRC regulations.
CIS was started by the government as a means of payroll for self employed subcontractors in the construction industry. The construction industry scheme applies to those who are deemed as either contractors or subcontractors in the eyes of HMRC. 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, whereas 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. It is a legal requirement for contractors to sign up to the Construction Industry Scheme, however it is not for subcontractors, though it is recommended due to higher deductions being taken out for those who have not registered. If you qualify under HMRC guidelines as both a contractor and subcontractor, you are also legally required to register for CIS.
How Does CIS Payroll Work?
The construction industry scheme works in a manner where contractors and agencies make deductions from the wages of subcontractors which are then paid to HMRC. These deductions are used as advance national insurance and tax payments for the subcontractor. At the end of the tax year, payments for the Construction Industry Scheme are tallied up, and taken off the total amount of payments that need to be made while filing tax returns. It is often important to register with HMRC for the CIS scheme regardless of whether you are a subcontractor, as if you are registered, deductions are taken at a lower rate than those who are unregistered (normally 20% for registered subcontractors, and 30% for unregistered). Construction Industry Scheme payroll is usually processed at the same time as regular payroll, and a return is then submitted showing HMRC what has been paid to the subcontractor. Sometimes subcontractors will achieve “gross status” if they have an exemplary tax record or have a particularly high turnover.
Get in touch with Centurion Payroll today to see how we could help you navigate the waters of CIS Payroll.