CIS (Construction Industry Scheme)
If you are part of the construction industry, you should be more than familiar with the Construction Industry Scheme that has developed since its introduction back in 1972.
What used to be a scheme largely aimed at foreign employees who were essentially receiving a tax-free wage has now become a systematic mechanism designed to ensure that everybody pays the right amount of tax.
Are we covered by the CIS?
As one would imagine, HMRC describes ‘construction’ in a manner that involves constructing, roofing, foundation and plastering. Yet it also provides several other programs, including:
- Demolition
- Scaffolding (assembly and dismantling)
- Plumbing
- Mechanical
- Lighting and design
- Landscaping
- Repairs, maintenance and extensions
If you contract workers in any of the above roles, you’re required to register and comply with the CIS. If you’re a sub-contractor, you don’t have to register with the CIS but you’ll pay a higher rate of deductions (30% rather than 20%) if you don’t. You can register as a sub-contractor here. And if you are a sub-contractor and also contract work out, you’ll need to register as both.
Managing Compliance:
Within the CIS, the source tax is excluded from the fees rendered to subcontractors, much as it will be with workers employed in the PAYE system. Until get to that level, the HR / payroll department would have a significant range of tasks to conduct.
- Check if the subcontractors are legitimate subcontractors, not de facto employers
- Check whether the subcontractor is licensed with CIS
- Measure tax
- Make payments and reimburse the money to HMRC
- If particular subcontractors opt out of CIS and want to pay a premium fee, payroll would need to measure it too
- Prepare regular reports and maintain track
- Pay both subcontractors on schedule.
How can outsourcing help me?
There is a direct and immediate advantage because, when outsourcing the workforce, you get to perform a lengthy list of tasks that would actually have to be done at home. But there’s more to outsourcing payroll than that:
- You’re having actual experience in an field that’s critical to achieving accurate. Hold the payroll in-house and that would become one of the other tasks that need to be performed. Outsource until you are Using your committed experience to get it correct first time, and you can concentrate on the core market.
- You’re minimizing the risk of handling payrolls
- You’re lock in regulatory enforcement, and you don’t encounter any unpleasant surprises.
- You’re minimizing the risk of handling payrolls
- You’re lock in regulatory enforcement, and you don’t encounter any unpleasant surprises. And if there is a payroll mistake, the payroll supplier bears the boot, not you
- You never meet the reimbursement date
- There is no cap on the amount of subcontractors you will put on the outsourced payroll.
- As CIS law shifts (as has been achieved frequently over the years) the payroll contractor is on top of it, and you don’t need to think about losing it.
