The CIS card
All construction workers should apply for the CIS (Construction Industry Scheme), especially those who work for companies and fall in one of the following categories:
- Owner of a limited company
- A partner in a partnership or trust
Companies deduct 20 % from your salary, which is sent to the HM Revenue and Customs (HMRC). Actually, you pay your taxes and national insurance in advance for in form of a deposit.
If you don’t have the CIS card, you might not be employed by the building company (work at some of the contractors is sometimes conditioned by having the card), or you might be charged 30 % of your salary.
If you don’t want to pay the deposit (20 % or 30 %), you can apply for the Gross Payment Status, while registering the CIS card.
That means that the contractor is not going to charge you anything from your salary, but you are going to pay all your expenses (taxes, insurance) at the end of the year, while sending the tax return.
However, you cannot apply for this exception sooner than after one year.
To register for the CIS you need:
- Name of your company (business name, if it differs)
- National Insurance Number (NIN)
- Unique Taxpayer Reference (UTR) Number (=), which you get during registration of your self-employed status
- If you are a subcontractor, but also a contractor and you pay for the work of subcontractor, you must have the following two information in the CIS card application:
The contractor offers the arranged services for the given price. Moreover, the contractors make use of the CIS mostly in building industry, but also in catering, gardening, cleaning, marketing, etc.
For example, you need to build a house or clean the office. You order the contractor, which specialises in the given area. The type of work, the contractor cannot do himself / herself gives to the subcontractor.Subcontractor
This might be anyone from the self-employed (bricklayer, plumber, cleaner, etc.) to a corporation.
Subcontractor has a deal with contractor for the type of work that must be fulfilled. The employee cannot be a subcontractor at the same time. Commonly, it is the type of work that the client cannot do (e.g. electricity network, installation of alarm, etc.). The contractor is also responsible for work that is done by subcontractor (if not said differently by the contract).
In case of you are self-employed and you have the UTR, you might register for the CIS card online:
- Don’t have a Government Gateway account
- Create a new Government Gateway account, link opens in a new window
During the online registration, you might apply for the Gross Payment Status, meaning that you get all the money and then you calculate the taxes and national insurance yourself.
If you don’t have the UTR, you must register as the new self-employed business.
During the registration, you are called if you work as a subcontractor (“working as a subcontractor”) and you only confirm. You register the new business, the same as the CIS card.
CIS card & salary
Therefore, when you obtain all the money correctly, make sure that you gave them the correct information about your business, which you stated during the CIS registration.
If these two things do not match, it might affect your income.
Deductions from the salary (deposit for taxes and national insurance).
The standard amount reduced from your salary is 20 %.
Higher deductions (30 %) are applied in the following cases, if:
- You don’t have the CIS card,
- You stated wrong data and they cannot verify it,
- You stated the name of business incorrectly.
Every month (if not stated differently), you should get a expenses statement from your employer. Based on that, you get to know if you must pay more on taxes or insurance to the tax office. Or, you are given a tax refund.
The contractor will not reduce the costs from the bellow stated items, which you put on the invoice:
- Used material
- Space rented for fulfilment of the contracted work
- Working material
Even if you have the CIS card, you must pay the taxes and insurance. Based on monthly statements, you know how much the employer has already paid each month.
At the end of each tax period (year) you must fill in the Self-Assessment Tax Return and state, among others:
- All incomes (from invoices)
- All deductions made by client (you find in section: “CIS deductions“)
- Other information that you are asked to provide.
Based on the provided information, the tax office calculates, how much you have to return in taxes and insurance.
You must pay the extra costs by the end of January, after the tax year finished (the tax year ends on April, 5).
The tax overpaid is of course returned by the tax office.
Application for the Gross Payment Status
You have two options:
- Via phone:
Telephone: 0300 200 3210
Telephone from outside of the UK: +44 161 930 8706
8:00 – 20:00 (Monday to Friday)
8:00 – 16:00 (Saturday)
Closed on Sunday, Christmas Eve, 25th December and New Year’s Eve.
From “Your Tax Account” go to “Other Services“.
Select: “Construction Industry Scheme – Subcontractors“.
To be eligible to apply, you must prove to the tax office that you passed certain tests. You must prove that:
- You always paid your taxes and insurance on time.
- You do construction work or connected activities on the territory of the United Kingdom.
- You have a bank account and get regular income there.
Business dictionarySole trader
- Business or trade owned by a single person.
- Individual offering certain services (a bricklayer, plumber, masseur, photographer, etc.).
- Owner, who is personally responsible for the business or trade, meaning also debts and damages. This is called “Unlimited Liability“.
- Business or trade owned by two or more persons.
- Workers in constructions, doctors, dentists, lawyers, etc. are typical example of experts united to share the benefits and know-how.
- The partners in trade share the „Unlimited Liability“.
- The company must have at least one director, who is responsible for the accounting, records and others.
The tax office checks your income within last 12 months. The VAT is not included and expenses for material must be minimally:
- £30, 000 – as self-employed,
- £30, 000 – for each of the members of the Limited Company or the minimum of £100, 000 for a company as a whole,
- £30, 000 – for each of the directors of the company or the minimum of £100, 000 for a company as a whole,
- If your company is run by more than 5 directors, each of them must have an income of more than £30, 000.
Each year, the tax office looks in your accounts and assesses if you are eligible to keep the Gross Payment Status. Be careful to pay the taxes on time (resp. send the tax return) and all the extra payments.
If you don’t fulfil all the requirements, you might be deprived of the Status, you might apply only after a year from getting the final denial.