Construction Industry Scheme
Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments and pass it to HM Revenue and Customs (HMRC).
About Construction Industry Scheme
Formations House recognises that cash flow and liquidity can be vital in the construction industry, and we’re delighted to offer a brand new product to very noticeably improve your cash flow. It is likely that you are already familiar with HMRC’s Construction Industry Scheme (CIS) – requiring contractors to make tax deductions when paying subcontractors. These deductions can be as large as 30% of the total payment due, and reclaiming the money is a small consolation when the loss of any cash flow can be devastating to a large portion of small business owners in construction.
What are my options?
Depending on the circumstances of your business it will either be possible to reduce the amount of pre-payment to HMRC (from 30% of the payment due to 20%), or it will be possible to apply for a total exemption.
Each application is assessed on its own merits but it is generally possible to apply for an exemption from the Construction Industry Scheme if:
- All of the work was carried out in the UK
- Annual turnover is £30,000 for sole traders, or £30,000 per director for limited companies
- There are no outstanding issues with HMRC (e.g. late tax returns, or outstanding payments due)
Outside the UK?
The same CIS rules apply if your business is based outside the UK, but you do construction work as a contractor or subcontractor in the UK.