CIS Registration- What is it? How to register with CIS
CIS, the Construction Industry Scheme, is a government scheme that allows sub-contractors to save money on their taxes and have a record of the work they complete. This article will look at the basics of CIS registration, including how to do it and why we strongly recommend you do it.
What is CIS?
CIS stands for “Construction Industry Scheme,” a system set up by the government to enable subcontractors in the construction industry to build their businesses and pay a lower tax rate.
The two types of businesses that should register are contractors and sub-contractors. A contractor is someone who hires a subcontractor. So, if I own an office block and hire someone to build an extension, I would be the contractor, and the builder would be the sub-contractor.
The CIS lays out the rules for both contractors and subcontractors. The first rule is that contractors MUST register with CIS. And sub-contractors SHOULD register so they can save 10% on their taxes.
A contractor must subtract 20% from their sub-contractor and send that to HMRC. They must also provide a document to their subcontractor to show the deduction and keep everything on record.
If a subcontractor is not registered with HMRC, they are liable to a 30% tax rate instead of 10.
How to Register with CIS?
CIS registration is relatively straightforward. Of course, nothing to do with registering with the government is ever super easy.
Although you can register via the phone or with a paper application, it’s far easier for contractors and sub-contractors to register online.
When a contractor registers as a new employer, HMRC will provide information about working as a contractor.
Which form sub-contractors should fill out depends on whether they are a sole trader, limited company, partnership, or foreign company doing construction work in the UK. Click here to find out which form you need to register.
You will need a government gateway ID to register. Select what kind of company you are, sign in with your government ID, and fill in all the required details.
Benefits of being CIS Registered as a Subcontractor.
- You are taxed at 20% instead of 30%. Everybody wants to save on their taxes, particularly in this economy. But by registering with CIS, you can save yourself 10% of your taxes each year.
- Contractors need to keep records. By law, all contractors who hire you need to keep a record of the payments they’ve made and the work you’ve done. This can help prevent complications or issues with HMRC.
- You can claim expenses, whether it’s for materials, transport, or sub-contracting other people. By registering with CIS, you can claim back your business expenses on your taxes.
Do I need to register with CIS?
If you’re a contractor, that is someone who hires subcontractors, yes. By law, anyone who hires subcontractors needs to be CIS registered.
If you’re a subcontractor, it is not compulsory. However, it can save you 10% on your taxes and enable you to always have a record of your work.
Which sub-contractors can register with CIS?
Any of the following sub-contractors can register with CIS.
- Civil Engineers.
- Demolition experts.
- Heating, water, gas, and utility engineers.
- Post-construction cleaners.