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Bishopsgate Recruitment Services

Providing Umbrella PAYE & subcontractor CIS solutions

Bishopsgate Construction Services

Providing subcontracted construction services across the UK

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CIS Payroll

The Construction Industry Scheme (CIS) refers to a tax regime set out by HM Revenue & Customs (HMRC) to cater for self-employed contract workers in the construction industry.

As a result of the amendment made to section 44 of the Income Tax (Earnings & Pensions) Act (often labelled the agency legislation) there are now stricter rules surrounding the employment status of contractors, with the burden of proof over a lack of supervision, direction or control now resting with the agency.

What is The Construction Industry Scheme (CIS)?

The Construction Industry Scheme (CIS) is a tax regime that HMRC set up to cater for self-employment in the construction industry.

Tax is deducted at either a higher (30%), net (20%) or gross level depending on the status of the subcontractor’s UTR number.

CIS tax deduction rates are as follows:

‘Net’ deduction (20%)

A flat rate of 20% is the standard deduction for subcontractors who have registered their UTR number under the CIS.

Higher deduction (30%)

Deductions at the higher rate of 30% may be taken if the UTR number you’ve provided to the contractor is either incorrect or has not been registered. If you are having problems with your UTR number being verified by contractors, you should contact the CIS office for assistance.

Gross payment (0%)

If you have been granted gross payment status by HMRC there will be no deductions made on your payment.

When completing your tax return, you will be able to offset any business-related expenses incurred throughout the year against your income for tax purposes. Any overpaid tax will be reimbursed to you by HMRC.

How CIS Works For Subcontractors

HMRC state that the scheme covers all construction work carried out in the UK, this includes roles involved with:

  • Alterations
  • Site preparation
  • Dismantling
  • Repairs
  • Decorating
  • Demolition

For more information on what is covered, please go to gov.uk

To register for the Construction Industry Scheme (CIS), you must:

Step 1

Register for self-assessment with HMRC who will provide you with a Unique Taxpayer Reference (UTR) number.
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Step 2

Contact the CIS office and register your UTR under the CIS, reducing the deductions made on each payment to you.
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Step 3

Your payments will be processed with the relevant CIS deduction made on your behalf. This will be passed over to HMRC and will be offset against your tax bill when you come to complete your self-assessment tax return at the financial year end.
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Step 4

The client you are working for will want you to record the time spent on assignment which is usually achieved by the completion of a timesheet. This timesheet is then passed to both the client/agency and the Umbrella.

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Step 5

The Umbrella company invoice the client on your behalf for the assignment rate on your behalf for the services you have performed.

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Step 6

The Umbrella company receives payment from the client and administers the assignment rate under the terms of your contract.

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Step 7

You will receive a reconciliation statement along with a payslip showing how the assignment rate is broken down showing all income and deductions. The payslip will provide your CIS breakdown and show the NET amount paid into your personal account.

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If you are a contractor looking for a CIS payroll company for your subcontractors, then please visit our construction services page.