How to Comply with the Construction Industry Scheme
Tax evasion is a serious concern, and HMRC is always trying to ensure everyone pays the right amount of taxes they owe. One of these schemes is the Construction Industry Scheme (CIS), aimed at businesses operating in the construction industry. There are quite a few roles and responsibilities associated with CIS, and contractors and subcontractors should be familiar with it.
Who Needs to Register for CIS?
To avoid paying penalties for non-compliance, contractors and subcontractors working in the construction industry are required to register for CIS. There are, however, some differences in the requirements depending on whether you are a contractor or a subcontractor.
As a mainstream or deemed contractor, one must register for CIS without fail. Subcontractors, however, have the option to choose whether or not they want to register for CIS. Furthermore, for businesses that act both as a contractor and subcontractors, it is imperative to register under CIS.
What Are Your Responsibilities Under CIS?
Depending on whether you are a contractor or a subcontractor, you may have slight differences in your responsibilities. The duties for each are listed below:
Contractor:
- Confirm Subcontractor’s Employment Status
- Verify Subcontractors
- Make CIS Deductions from Payments
- Submit monthly CIS Returns
- Maintain Records
Subcontractor:
- Register with HMRC
- Apply for Gross Payment Status
- Keep Records
What Are the Consequences of Late CIS Filing?
Late filing of CIS will lead to hefty penalties the longer you delay. The penalties for late filing have been listed below:
| Late Payment time | Penalty Amount |
| 1 day late | £100 |
| 2 months late | £100 initial + £200 next |
| 6 months late | £300 initial + £300 next |
| 12 months late or more | £600 initial + £300 next |
The late payment and repayment interest rates are as follows:
- Late payment interest- 7.75% (22 August 2023 onwards)
- Repayment interest- 4.25% (22 August 2023 onwards)
