Under the Construction Industry Program (CIS), subcontractors have their money deducted from contractors who report it to HMRC. These are advance payments to the tax and social security of the subcontractor. You do not need to enroll in the program if you only perform certain exceptional tasks such as surveying, architecture, or delivering materials. 6. How to enroll in the construction industry program It is recommended to give a subcontractor a statement of payment if the payment was made gross, but you are not required to do so. To verify subcontractors, you will need your unique taxpayer reference (RKU), accounting agency reference number and employer reference number. If you are a foreign subcontractor working for a UK contractor, you will need to register with CIS. In most cases, you can register as a self-employed person by calling the New Self-Employed Helpline on 0300 200 3504. If you are already registered as self-employed but need to register for the CIS program, please contact the CIS Helpline – 0300 200 3210. The CiS Guide for Contractors and Subcontractors provides more detailed information on what is and is not covered by the system.
Of course, you will then have to familiarize yourself with how to check subcontractors, how to calculate the CIS tax. and how to report information to HMRC and record payments to subcontractors on a monthly basis. The subcontractor may work in any way, including himself or with his employees or subcontractors. Subcontractors must pass three tests to receive payments: The contractor deducts 30% of the taxes from the payments to the subcontractor. This deduction excludes the VAT collected by the subcontractor and the cost of materials. You can request the gross payment status at the same time. This will inform the contractors that they will have to pay you in full and without deductions. If you choose gross payment status, you will be responsible for paying your tax and social security at the end of the tax year.
Many construction companies fall into both categories, in which case you need to register as both, then follow the contractor`s rules if you work as a contractor and follow the subcontractor`s rules if you work as a subcontractor. Under the CIS, a contractor must deduct 20% of payments and forward them to HMRC. These deductions are considered down payments on the tax and social security (NI) account. If a person decides not to register for the system, a contractor must instead deduct 30% of the payments. The entrepreneur deducts taxes in the amount of 20% excluding VAT and materials. If the subcontractor is not entitled to the gross payments, it is always better to register so that he receives the 20% tax deduction. Cis helps HMRC ensure that construction companies pay the right tax by requiring contractors to deduct the withholding tax from their subcontractors` remuneration using a system similar to pay (Pay as You Earn). When to register: Register if you intend to pay your subcontractor, whether you have to pay the subcontractor a gross or net amount. However, if you hire subcontractors, you will have to deal with the Construction Industry Program (CIS) because you have to use it and follow its rules.
For CLC purposes, a contractor is a business or other business that pays subcontractors for construction work. If they have to make a deduction, contractors must: If you are still confused, there are more details in the HMRC Guide for Contractors and Subcontractors. The regulation applies to both contractors and subcontractors. The CIS registration process differs slightly depending on whether you are self-employed or operate your business as a limited liability company. How to register: If you register as a sole proprietor, you can do so online because you already have a unique Transaction Reference Number (LIU). You must have a Government Gateway user ID and password to use this service. If you do not have credentials, you can create them during registration. And for independent subcontractors, whose deductions go into their tax return pot for self-assessment, we can take care of the compensation of the money already deducted. .