The Construction Industry Scheme (CIS) is a UK tax scheme that applies to businesses that work in the construction industry. It is designed to ensure that contractors in the construction industry pay the correct amount of tax on their profits and that subcontractors receive the correct amount of tax relief on their payments.
Under the CIS, contractors are required to deduct tax from payments made to subcontractors and pay this tax to HM Revenue and Customs (HMRC). The rate of tax that contractors must deduct depends on the subcontractor's CIS status. Subcontractors who are registered under the CIS can choose to be taxed at a higher or lower rate, depending on their personal circumstances.
The following businesses are required to register with the CIS:
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Contractors: Businesses that carry out construction work in the UK and pay subcontractors for their services are required to register with the CIS. This includes businesses that carry out building, civil engineering, and repair and maintenance work.
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Subcontractors: Businesses that carry out construction work in the UK and are paid by contractors are required to register with the CIS. This includes businesses that carry out work as self-employed individuals or through a limited company.
The CIS does not apply to businesses that carry out design work or supply goods or materials to the construction industry.
To register with the CIS, contractors and subcontractors must complete a registration form and submit it to HMRC. They must also obtain a Unique Taxpayer Reference (UTR) and provide this to their contractors or subcontractors, as applicable.
By registering with the CIS, contractors and subcontractors in the UK construction industry can ensure that they are complying with the tax laws and paying the correct amount of tax. It is important for businesses to carefully track their payments and deductions and to file their CIS returns on time to avoid penalties and fines.
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