Introduction

For contractors:

Getting started with CIS payments

HM Revenue & Customs (HMRC) will set you up with a Construction Industry Scheme (CIS) payment scheme as soon as you register with them as a contractor. If you already have employees, HMRC will simply change your existing PAYE (Pay as You Earn) scheme to a PAYE/CIS scheme. CIS deductions should be added to the PAYE/National Insurance contributions (NICs) that you pay and a single payment should be made each month or quarter. If you do not already have employees or have not been set up with a payment scheme before becoming a CIS contractor, HMRC will give you a scheme for CIS payments only.

Checking subcontractors' employment status

Before you can pay an individual for work they do under the Construction Industry Scheme (CIS), you'll need to confirm they're properly self-employed and not an employee. You may also need to verify them with HM Revenue & Customs (HMRC). CIS only covers self-employed workers - it doesn't cover employees. So before you pay an individual under CIS you'll need to make sure you haven't engaged them under a "contract of employment". Employment status is covered by general law and depends on the terms of your agreement with the worker. HMRC has guidance on employment status and a status indicator tool you can use on their website. Use the Employment Status Indicator on the HMRC website.

Verifying subcontractors

You may need to "verify" a subcontractor with HMRC before you first pay them. This means checking whether they are registered with HMRC, so that HMRC can tell you how to pay them - gross or after making a deduction from their payment. Generally, if you haven't previously engaged the subcontractor or paid them in the recent past, then you'll need to verify them before you pay them. Depending on the system you use for CIS, you can verify a subcontractor by calling the HMRC CIS Helpline on Tel 0845 366 7899 (open from 08.00 to 20.00 seven days a week), using the HMRC CIS Online service, using suitable commercial CIS software or using Electronic Data Interchange (EDI).

You can access the CIS Online service through the HMRC website. You'll need to register for CIS Online for contractors if you haven't already. Third party CIS software is an alternative to the free HMRC online service. HMRC check CIS software to ensure it can work with their own systems. They list the ones that can on their website. EDI is suitable for large contractors who need to verify a lot of subcontractors each month. You'll need to register with HMRC to use EDI if you haven't already. However you verify your subcontractors, you'll need to have certain details about them - and about your own business - to hand.

How to make CIS payments to HM Revenue & Customs

You will find all the information you need to make Construction Industry Scheme (CIS) payments to HM Revenue & Customs (HMRC) in the HMRC guide on how to make PAYE (Pay As You Earn) payments - find out how to make PAYE payments at the HMRC website. This guide includes details about making CIS payments and covers all aspects of how to pay from electronic payment methods to posting your payments.

For sub-contractors:

Payment under CIS - gross or under deduction

Under the Construction Industry Scheme (CIS), there are two ways of paying subcontractors - gross or under deduction. If you are registered for gross payment, the contractor pays you in full without any deduction. So you'll need to pay tax and National Insurance contributions (NICs) on this amount later through your tax return. See gross payments under CIS.If you are registered for payment under deduction, the contractor takes off an amount (currently 20 per cent) before they pay you and they must pay this over to HM Revenue & Customs (HMRC). You'll still need to pay tax and NICs on your payments later through your tax return, but HMRC will set any deductions that have already been made from your payments against this bill. See CIS payments under deduction.

More advice

For more specific advice please contact us by telephone on 01299 879140.