How to operate the Construction Industry Scheme (CIS) as a limited company or sole trader
If you are involved in the construction industry as a contractor or subcontractor, it is important to familiarise yourself with the Construction Industry Scheme (CIS). This scheme enables contractors to deduct tax from a subcontractor's pay at source and submit it to HMRC.
CIS deductions made by a contractor from a limited company's income can offset the company's Corporation Tax liability or be refunded by HMRC.
The same principles apply to sole traders, with CIS deductions used to offset Personal Tax liability and accounted for in the annual Self Assessment.
Contractors must register with HMRC if they make deductions from subcontractors, while subcontractors are required to register for CIS payments that have been deducted.
CIS covers most construction projects involving:
| A permanent or temporary building or structure | Civil engineering works like roads and bridges. |
| Preparing the site, e.g. laying foundations and providing access works | Demolition and dismantling |
| Building work | Alterations, repairs and decorating |
| Installing systems for heating, lighting, power, water and ventilation | Cleaning the inside of buildings after construction work. |
However, you don’t have to register if you only do certain jobs, including:
| Architecture and surveying | Scaffolding hire (with no labour) |
| Making materials used in construction including plant and machinery | Carpet fitting |
| Delivering materials |
Running construction site facilities - e.g. canteen / cleaning |
So if you are a sole trader, in a partnership or own a limited company and you do any of the following:
- you pay subcontractors to do construction work
- your business does not do construction work but you have spent more than £3 million on construction in the 12 months since you made your first payment
then you must register as a contractor with the Construction Industry Scheme (CIS).
You can get in touch with our onboarding team below if you have any questions on this or alternatively, the Gov.uk website has plenty of useful guidance as well as a CIS helpline for any questions you may have.
GOV.UK guidance:
https://www.gov.uk/government/organisations/hm-revenue-customs/contact/construction-industry-scheme
Get in touch to find out more:
📞 01179 297 683 - Option 1
📝 Register with Nasa Consulting