The Construction Industry Scheme (CIS) is a way of taxing self-employed construction industry workers. The main premise is the deduction of tax at source on payments relating to construction work.
If you’re self-employed, or are working for a contractor as part of your own company, it’s advisable to register as a subcontractor within the CIS.
The CIS applies mostly to contractors and subcontractors involved in mainstream construction work. However, companies with a high annual spend on construction may count as contractors and be eligible for the scheme, even if their main business isn’t in construction.
Within the CIS, you can fall under two classes of contractor:
Mainstream contractors run businesses which employ subcontractors for construction work; often this might be a property developer or speculative builders. This also applies to foreign contractors undertaking projects in the UK, as well as businesses spending an average of £1 million a year on construction work within a 3 year period.
Deemed contractors operate within industries that are not construction related, while still spending a large amount on construction work. They will remain as deemed until they can prove they’re spending more than £1 million per year over 3 consecutive years.
You’re classed as a subcontractor if you undertake construction work on behalf of a contractor. This applies if you personally do the work, have employees do it or subcontract it out yourself.
If you’re classed as an employee, CIS doesn’t apply to you; this is the case if your contract is a ‘contract of employment’. In this case, your tax will be paid through PAYE.