What new construction contractors need to know about the CIS

Construction contractors need to make sure they follow official protocols set out by the government, including the Construction Industry Scheme (CIS). If you are unsure of everything you need to do to comply with the initiative, it is worth reading this guide.

What is the CIS?

New construction contractors might not be aware of what the CIS is. In this case, it is worth doing thorough research into the initiative to make sure you know everything about it. In brief, it establishes rules on how to pay subcontractors and it obligates freelancers to do certain things under the scheme before they can start contracting.

For instance, they need to make sure their subcontractors are registered with HM Revenue & Customs (HMRC), that they themselves are signed up and that they submit monthly returns. You will also be required to keep proper records, giving subcontractors' deduction statements and pay the deductions to the HMRC.

Give correct information when registering

It is crucial that you sign up to the scheme properly and adhere to its regulations, as the shadow chancellor Ed Balls has called on the government to crack down on bogus self-employed construction workers. He made the speech to the Trades Union Congress that there are 300,000 workers that fall into this category in the UK, costing the country around £350 million in total by these people avoiding paying the appropriate tax.

Employers might be tempted to say their workers are not in full-time employment in order to reduce the amount of money they have to pay towards national insurance, tax, sick pay and overtime.

By not adhering to the regulations set out by the CIS and giving false information about your self-employed subcontractors, you will not only be costing the nation a lot of money, but you'll also be breaking the law.

Mr Balls went on to say: "It's not fair to taxpayers and it's not fair to [union] members either."

Before you pay a subcontractor with the CIS initiative, you need to confirm that they are officially self-employed as the CIS does not cover employees. Therefore, your agreement shouldn't have a 'contract of employment' attached to it, as this will make them members of staff and not freelancers. To verify them, you can call the CIS Helpline or consult its Online Service, among other options.

How to get help

If you think you will not have time or you don't quite understand how to register on to the CIS scheme, there are many different ways you can get help. For instance, you can use a contracting service that will do all the hard work for you. It can take care of the administrative duties, such as making sure all your subcontractors registered with HMRC.

It will also handle all the paperwork, which means you don't have to worry about invoicing your clients or producing payslips. All these financial jobs can take up a lot of time, so if you would rather concentrate on getting more construction projects or get involved with them yourself, this service could be invaluable.

As well as taking care of your admin with regards to the CIS, an accountancy service provider can also sort out your accounting jobs, such as chasing payments from clients. Therefore, concerns about filling in your tax return on time or making sure your accounts balance will be a thing of the past.