What is the CIS?

The Construction Industry Scheme (CIS) sets out the rules for how payments are made to self-employed individuals working in the construction industry. CIS covers construction work carried out in the UK and defines the types of work that are generally classed as construction operations. As a general rule, the scheme includes most types of work done to a permanent building, a temporary structure or to civil engineering work or installations, including:

• Site preparation
• General construction (bricklaying, plastering, roofing etc
• Alterations and extensions
• Repairs and refurbishments
• Decorating
• Dismantling and demolition

Self-employment status

Our service applies only to genuine self-employed individuals working within the CIS. If you are not yet registered as self-employed, then you will need to register as soon as possible.

How to register as self-employed

You can register online at www.hmrc.gov.uk, or you can call the Self-employment Helpline on 0845 915 4515. To register you must have a National Insurance number, the date your self-employment started, the nature of your business and a business address. You will be given a Unique Tax Number (UTR).

CIS tax deductions

We are required under CIS rules to verify your CIS status. Your CIS tax rate is determined by HMRC and can be set at 0%, 20% or 30%. The normal tax rate is 20%, but HMRC may review your tax history and allow you to receive your payments gross (0%), but you need to pass stringent tests for this to apply. If you are not registered with the HMRC CIS scheme, deductions will be made from your payments at a higher rate of 30%.

National Insurance Contributions

Being self-employed you will pay both Class 2 and Class 4 National Insurances Contributions. Class 2 contributions are currently set at a fixed rate of £2.40 per week. Class 4 contributions are calculated as a percentage of your taxable profits - you pay 8% on annual taxable profits between £5,715 and £43,875 and 1% on profits over that amount.

You will need to organise monthly or quarterly payment of your Class 2 NICs, and this can be arranged by contacting the NI contributions office (call 0845 915 4655) or click here to download a direct debit application form. Class 4 NICs are paid annually once your final taxable profit has been calculated, and you should set aside sufficient cash in reserve for this payment.

More information on this subject:  Class 2 NICS   Class 4 NICS

Annual self-assessment tax returns

When we process a payment to you, we deduct the CIS tax and pay this to HMRC on your behalf. This deduction will be shown on a Tax Advice which accompanies your payment Remittance Advice. As you are self-employed you will need to complete an annual self –assessment tax return. As the CIS tax deduction is a notional amount, there may be a balancing tax figure to pay or to be refunded.

Your accountants

We strongly advise you appoint an accountant to deal with your tax matters to ensure that you fully benefit from your self-employed status. Whilst this can be expensive, we have negotiated reduced rates for self-assessments. Call us for details.