This is how HMRC gets Income Tax from suppliers in the building business. It’s called the building business Scheme (CIS).
If you work as a building worker for yourself, you can sign up for the plan. People who work full-time are not eligible for the plan. The company you work for can tell you which group you’re in.
What does the Construction Industry Scheme do?
Subcontractors who worked in building on their own were paid in cash in the past. But this made it hard for HMRC to keep track of how much tax everyone owed. Because of these problems, HMRC made the CIS in 1971, which lets them tax your associate earnings as soon as your client pays you.
What kinds of work does CIS cover?
- Decorators
- Taking down
- Taking apart
- Builders
- Any changes
- Fixing up
- Taking apart
- Setting up the site
- Any changes
- Besides!
Why should you sign up for CIS if you work as a building subcontractor?
As long as you’re signed up for the plan, only 20% of your salary is taxed. In the event that you are not listed, your provider takes 30% of your pay. This is more than you owe unless you make more than £50,270 a year. You’ll have to claim any extra money back at the end of the tax year. Putting in a tax return is how you do this.
You have until January 31, the year after working, to file this. (To learn more, read about the times of the tax years.)
In addition to the technical side of things, some companies might not let you work on their site unless you’re registered with CIS. Before you ask about work, you should find out if they require registration. Before you start, the worker will check you with HMRC.
What is the grant from CIS?
Most of the time, the 20% reduction is more than the tax you owe, so subcontractors can get a CIS tax refund from HMRC in April of the next tax year. Most building workers in the CIS get back about £2,000 on average.