20+ Years Experience in CIS Compliance
CIS Scheme
There is a special scheme for self-employed contractors and sub-contractors working in the construction industry called the Construction Industry Scheme (CIS).
- HMRC CIS compliant
- GBP & EUR payments
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We know CIS so
you don't have to
Sovereign Plus has been working in the field of CIS for over 20 years and ensure all contracts with clients and subcontractors are legally robust and all tax on subcontractors’ payments is accounted to HMRC.
Who?
All construction operatives are required to be registered for CIS. Subcontractors are not legally required to sign up, but deductions from payments increase from 20% to 30% if not registered.
Why?
The scheme exists to prevent fraudulent employment and tax evasion. Under the scheme, contractors deduct money from payments made to subcontractors at a standard rate pf 20% and pay it directly to HMRC. These count as advance payments towards tax on behalf of the subbie.
Simple HMRC verification process to determine the status of subcontractors
We check all subbies to determine their status when they register.
Gross no Tax
Gross No TaxIf they are ‘Gross’ no tax deduction is applied
CIS Registered
If they are CIS registered, a 20% deduction is applied
Non Registered
If they are unregistered with CIS, a 30% deduction is applied – we will then ensure they register for CIS
The Risk of CIS Penalties
The Construction Industry Scheme tax system is backed up by penalties. Penalties cover situations such as: Incorrect monthly returns submitted fraudulently or negligently, Failure to provide CIS records for HMRC to inspect, Incorrect declarations regarding employment status
£100 Fine
Failure to submit monthly return, (including a nil return) by the correct date.
Additional £200 Fine
If monthly return is still outstanding after two months.
Additional £300 Fine
If monthly return still outstanding after three months OR 5% of the CIS deductions from the return (whichever is higher), and additional increases for returns that remain outstanding at 6 and 12 months.
Loss of Gross Payment Status
Under the CIS scheme, HMRC is reviewing every firm’s status and payment history and estimate that 40% are failing the test.
HMRC can levy up to £3,000 per monthly return submitted if you incorrectly tick the self-employed status declaration when your sub-contractors should have been employed.
Responsibilities
Your CIS responsibilities to HMRC are to:
Verify
Verify each sub-contractor with HMRC before you pat them, and Calculate and deduct CIS tax in accordance with the verification details
Inform
Inform the sub-contractor the amount that they will be paid
Submit
Submit your CIS300 report by the 17th of each month, detailing all payments made to, and deductions collected from sub-contractors
Nil Return
You must submit a “nil return” even if no sub-contractors are paid
Payment Statement
Provide a payment statement to the sub-contractor at least monthly
Useful Links For CIS Scheme
Still not sure? Find resources to useful articles about CIS below.
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