The Construction Industry Scheme (CIS) – Is It For You?
In our last blog post we gave an explanation of the Construction Industry Scheme (CIS) which is used by HMRC to monitor the way in which subcontractors are paid in the construction industry in the UK. We’re going to take a look at how to decide whether or not your work comes within CIS regulations. If your business works in the construction sector or performs construction related tasks, then you may need to register it under CIS as either a contractor or a subcontractor.
Other businesses and organisations may also find it necessary to register with HMRC as contractors if the organisation spends more than a certain sum each year on the type of “construct5ion operations” which are covered by the scheme, even organisations whose main activity may not be construction.
CIS applies to all types of companies operating in the construction industry in Britain, including:
• Self-employed individuals who work as sole traders
• Limited liability partnerships (LLPs)
While it’s obvious that traditional construction companies like builders will need to register with the scheme, it also applies to businesses such as staff bureaux and labour agencies, gang masters or gang leaders and property developers.
Some businesses and organisations that do not undertake building work may still be treated by HMRC as a “deemed contractor” and be required to register with CIS if the organisations spends more than £1 million per year on construction operations for a three year period. This could apply to businesses and organisations including:
• Some large businesses
• Housing associations
• Local authorities
• Government departments
• Other public bodies
• Other “arm’s length” management organisations (ALMOs)
CIS may also apply to businesses based outside the UK if the company does work in the UK or in UK territorial waters. Companies based outside the UK planning to undertake construction work covered by the scheme will need to register with CIS.
Now let’s take a look at what CIS considers to be construction operations that will necessitate CIS registration. As a general rule, CIS includes just about any work that is done to a permanent building, a temporary structure or a civil engineering project or installation.
The types of construction work that are covered by the CIS include jobs such as:
• Site preparation
• General construction work including bricklaying, plastering, roofing, etc.
• Alterations and extensions
• Refurbishment and repairs
• Dismantling and demolition work
The Scheme defines construction as a broad term to include:
• Building things
• Making things
• Putting things together
• Assembling things
This means that construction work can also include the assembly of prefabricated units and site facilities that are actually made off site.
If you need to find out more about the types of work covered by the Scheme, HMRC has published a booklet CIS 340 “Construction Industry Scheme – a Guide for Contractors and Subcontractors which can be downloaded free of charge here.