What is CIS construction, and how does it work? And The impact of CIS construction on the UK economy
If you want to know more about CIS, construction, or how HMRC is trying to help those in the industry, this article is for you. Today, we’ll cover what CIS is, how it works, and what benefits it brings to subcontractors and contractors alike.
What is CIS? Construction Industry Scheme
As you might have noticed from that title, CIS is an acronym for Construction Industry Scheme. And it’s a scheme created by HMRC and the government to allow subcontractors within the construction industry to have their taxes and national insurance bills covered by whoever hires them.
Subcontractors registered in this scheme will have 20% of their income towards HMRC, and those not registered will have 30%.
This scheme allows subcontractors to always get paid for their work, and a record of that payment is sent to the government. It also means that they no longer have the burden of having to calculate for themselves how much tax they owe.
How does CIS work?
If you’re either a contractor or subcontractor, we recommend signing up for CIS. Construction industry workers will benefit significantly by being registered for this scheme.
It works because when a contractor pays his subcontractors, he will deduct 20 or 30% of that payment and send it directly to HMRC. This money is used to cover the tax that the subcontractors owe.
Not only will it save contractors money on their taxes, but it will also simplify them. Instead of needing to calculate how much tax they owe, they would already have paid for it via this scheme.
How to register for CIS.
If you’re either a subcontractor or a contractor and wish to register to become part of the CIS scheme, you must register online. The first step is to go to https://www.gov.uk/what-you-must-do-as-a-cis-subcontractor/how-to-register.
To register, you will need the following information.
- Your national insurance number.
- The official name of your business.
- Your Unique Taxpayer Reference (UTR)- The number you are assigned when you first register as self-employed.
- Your VAT registration number (if you have it)
When first registering, you must select if you are registering as a contractor, subcontractor, or both because each group has a separate form to fill in.
How CIS has impacted the construction industry.
Unfortunately, there isn’t much data about the impact of CIS on the construction industry. However, we can speculate.
The CIS is designed to simplify and reduce taxes for construction industry employees. This should mean that these people have more pay to take home and the confidence to invest more in their companies.
Since taxes have been removed as a barrier, it should encourage more people to become involved with construction.
How CIS has impacted the UK economy.
Again, there is no official data, so we can only speculate. However, construction is hugely important for the UK economy. So, anything that makes things easier for construction workers will benefit the whole economy.
Without construction, many other industries would also collapse. Whether hotels, shops, gyms, toilets, roads, or parks, everything people use and enjoy must be constructed. And, without people in construction, the economy will not be in a good position.