The Construction Industry Scheme (CIS)
The Construction Industry Scheme (CIS) is a government scheme that helps to ensure tax and national insurance are paid correctly on payments made to subcontractors within the construction industry.
If you are a contractor carrying out construction operations, you will need to register for the scheme with HMRC and deduct tax from payments made to subcontractors at the rate advised (either 0%, 20% or 30%). These deductions are paid to HMRC monthly using a CIS return and will be offset against the subcontractor’s own tax and national insurance liability.
Subcontractors do not necessarily have an obligation to register but deductions will be taken from their payments at a higher rate if they don’t.
So, what are Construction Operations?
The Finance Act 2004 lists the following as construction operations:
- construction, alteration, repair, extension, demolition or dismantling of buildings or structures.
- construction, alteration, repair, extension or demolition of any works forming, or to form part of the land.
- installation in any building or structure of systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection.
- internal clearing of the buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration.
- Painting or decorating the internal or external services of any building or structure.
- operations which form an integral part of, or are preparatory to, or are for rendering completion of construction operations.
The following operations are not construction operations for the purpose of the scheme:
- drilling for, or extraction of, oil or natural gas.
- extraction of minerals and tunnelling or boring, or construction of underground works.
- manufacture of building or engineering components or equipment, materials, plant or machinery, or delivery of any of these things to site.
- manufacture of components for systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or delivery of any of these things to site.
- the professional work of architects or surveyors, or of consultants in building, engineering, interior or exterior decoration or in the laying-out of landscape.
- the making, installation and repair of artistic works, being sculptures, murals and other works, which are wholly artistic in nature.
- signwriting and erecting, installing and repairing signboards and advertisements.
- the installation of seating, blinds and shutters.
- the installation of security systems, including burglar alarms, closed circuit television and public address systems.