Are you a part of a partnership, company, or a self-employed person who is working in the construction or building industry? If so, paying tax under the Construction Industry Scheme (CIS) may be required. Turn to Every Penny Accounts for assistance – our expert accountants are on hand to help you navigate the complexities of your CIS tax returns. Get in touch now.
A scheme from HMRC, if you work for a contractor in the construction industry but not as an employee, they are obligated to withhold up to 30% tax from their payment to you. If you are registered, this amount drops to 20%. The deductions are considered advance payments towards a subcontractors National Insurance and tax and while contractors are required to register, a subcontractor doesn’t have to but CIS deductions will be taken on the individuals behalf.
If you do any of the following as a contractor, you must register for CIS:
Pay Subcontractors: If you pay subcontractors for construction work, CIS payments must be made.
£3m in Construction Spendings: Whether your business is typically in construction or not, if you have spent £3 Million or more on construction in a 12 month period, you must register.
Subcontractor Construction: If you are a subcontractor who is working with a construction firm on a project, you must register.
If you fall under both categories – subcontractor and contractor, you must register as both. If you do not register, you will receive the higher deduction rate and you must still file for your tax return, with a failure to do so typically resulting in a hefty fine.
Since March 2021, The Domestic Reverse Charge (DRC) for VAT is a significant change affecting VAT-registered businesses and start ups operating within the Construction Industry Scheme (CIS).
Shift in Liability: Under the DRC, the liability for VAT shifts from the supplier to the customer for certain construction services. This means that the customer (recipient of the service) is responsible for accounting for the VAT to HMRC instead of the supplier.
Scope of Services: The DRC applies to specified construction services as outlined by HMRC. These include construction, alteration, repair, demolition, and installation services carried out on buildings or structures, among others.
Cash Flow Impact: The DRC can have a significant impact on cash flow for both suppliers and customers. Suppliers no longer receive VAT payments from customers, which may affect their cash flow. Conversely, customers need to account for VAT on their VAT returns, which could impact their cash flow requirements.
Compliance Challenges: VAT-registered CIS businesses need to ensure compliance with the new DRC rules. This includes correctly identifying whether the DRC applies to specific transactions, adjusting accounting systems and processes accordingly, and providing accurate documentation to customers.
Collaboration with Accountants: Working closely with Every Penny Accounts can help businesses navigate the complexities of the DRC and ensure compliance with VAT regulations. We can provide guidance on specific transactions, VAT treatment, and reporting requirements.
At Every Penny Accounts, we provide a comprehensive service that assists with all aspects of CIS to our clients across the UK. Whether you’re looking for assistance with your self-assessment tax return and how to file it with companies house, need help understanding your gross payment status, or need assistance with each tax month, we can help. Whether you’re working as a sole trader or a contractor within the construction industry, we can take you through the steps to register as a contractor, verify subcontractors payments and deductions, prepare and submit your monthly CIS return, and more! Reach out to our team now for more information on the tailored service we provide!
Looking for any of our other services? We also offer year-end account services for limited companies and even have a guide dedicated to exploring year-end accounts and how they work. Find out more by contacting us now!
For more information, the team at Every Penny Accounts is on hand to help! Get in touch with our expert accountants today to find out about the bespoke service we offer that can be tailored specifically to your unique needs and requirements and our services can be offered remotely. Either fill out our contact form and we’ll be in touch as soon as possible, or give us a call to speak directly to our experts and receive a quote for our services.
To ensure subcontractors in the construction industry are paid correctly and the tax deducted from payments are correct, you must register with CIS before you start working within the construction industry on a project. Registration is relatively straightforward – available to do online or by post. If you need assistance with this, Every Penny Accounts can help. We work closely with subcontractors and contractors to ensure they are registered correctly and avoid any penalty payments that can occur from not registering.
If you have already begun work and have not registered, you will be working under the wrong employment status, but it’s not too late. While you may need to pay a late registration penalty, this amount is determined by how long you have been working without being registered, so the sooner you do it, the less you will pay. However it’s important to note that CIS and your self-assessment tax return are two separate things that must be filed if you are a subcontractor.
If you pay tax as a sole trader, independent subcontractor, or business, Every Penny Accounts has the service for you! In our many years of providing quality CIS tax return services, we have built up a reputation amongst our customers for providing outstanding professional advice and accounting. Some of the reasons our customers choose use is because we offer:
Our team has been providing services from our base in Ripon to the rest of the UK for many years now, and in addition to CIS returns, we also provide expert bookkeeping, payroll, and accounts services. Whether you’re looking for advice on tax relief on your taxable income or need a service to help with your monthly end reporting within the tax year, we can help!
Keeping your finances in order shouldn’t lead to a worse financial situation, which is why we ensure that our prices are fair, reasonable, and above all, affordable. Our customers appreciate our approach to accounting and choose us for a cost effective service to file their CIS returns. Get in touch now for a quote for our services.
Made up of expert accountants, our team has many years of experience providing a wide range of accounting services. We can assist you with your bookkeeping, tax refund, self-assessment tax return, and more. Don’t settle for less when you can have an experienced and reliable accountant from Every Penny Accounts!
