Last edited 25 Feb 2021

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CIS contractors and CIS sub-contractors


[edit] Introduction

The Construction Industry Scheme (CIS) sets out a series of rules for how contractors should make payments to sub-contractors. The scheme was introduced to try and prevent the loss of revenue to the exchequer arising from payments between contractors not being properly accounted for for tax purposes

For the purposes of the CIS the terms contractors and sub-contractors have very specific meanings. These are terms that are widely used within the building industry but for the purposes of the CIS it is important that the specific meanings are clearly understood as they have direct relevance to the manner in which payments between parties may be made, and the associated tax treatment of those payments.

In this article they are referred to CIS contractors and CIS sub-contractors.

[edit] CIS contractors

Under the CIS there are two groups of contractors:

[edit] Mainstream contractors

These include:

[edit] Deemed contractors

The CIS also identifies entities that are deemed to be contractors. These may be public bodies or other concerns who carry out or commission construction activities. Such entities are deemed to be contractors in the following circumstances:

  • Their average annual expenditure on construction operations in the period of three years ending on the last accounting date exceeds £1 million.
  • If they have not been trading for the whole of the last three years they will be deemed to be contractors if their total expenditure on construction activities for that part of the three year period during which they have traded exceeds £3 million.

Any concern that is deemed to be a contractor because one of the above conditions is met will continue to be treated as such until construction expenditure reduces to less than £1 million for three successive years.

[edit] CIS sub-contractors

This term describes a person or body that has agreed to carry out construction operations for a contractor. This may involve the CIS sub-ontractor:

Such CIS sub-contractors may be companies, self-employed persons, public bodies, foreign businesses or gang-leaders. Persons may be employed by agencies to undertake construction work in which case the agency, howsoever constituted, shall be treated as a CIS sub-contractor.

NB: In June 2014, the government launched a consultation into ways to improve the CIS by reducing the administrative burden it imposes. Some people within the industry have called for the scheme to be scrapped. Ref. Construction Enquirer Calls grow to scrap CIS tax scheme 11 July 2014.

This page was created by:--Martinc 17:59, 19 June 2013 (BST)

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