The Construction Industry Scheme (CIS) is a scheme by which the contractors deduct money from the payments of the workers and transfers it to the Revenue department. These deductions are considered as an advance towards the worker’s National Insurance and tax.
For availing this scheme, the contractors have to register. A person is considered as a contractor if either he/she is paying the workers for construction work or he/she spends on an average more than one million pounds a year on construction for any three-year period.
Registration of the workers are not mandatory but if any worker is not registered, deductions from their payments will be at a higher rate. A person is considered as a worker if he/she does construction work.
If someone falls under both the categories, they must register under both of the categories.
CIS covers most of the construction work from a permanent/temporary housing or structure to construction works like roads and bridges.
Considering the purpose of CIS, the following construction works are included:
- Providing access works and laying foundations which fall under preparation of the site.
- Work in buildings.
- Repairs, decorations and alternating work.
- Dismantling and demolition of structures
- Work pertaining to installing systems for lighting, water systems, power, heating and ventilation in the building after the completion of the construction work.
There are several jobs for which registration is not required. Examples of them are jobs related to carpet fitting, surveying of the area and architectural work, scaffolding hire (provided there is no labour), production of materials which are used for construction such as plant and machinery and delivering of these materials.
For receiving income in the most hassle free ways, there are several companies referred to as the Umbrella companies which offer transparent services with all the CIS deductions taken care of. They offer several hassle-free services from taking care of your tax return to obtaining the UTR number.
An umbrella company is considered as an employer and therefore all contractors working with them must sign a Contract of Service. This contract takes care of the obligations and rights of the contractors in matters of employment protection, maternity pay and sick pay. The law is complicated and there is a body of case law which is a guiding body on issues related to the service contract.
These companies are generally run by accountants and are specifically for the contractors. They operate on a payroll service. This manages the payments of the contractor while abiding the rules and regulations laid down by HMRC. They reduce the contractor’s stress of knowing the latest law while ensuring maximum payout. Hence all the taxation burden are reduced.