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Accounting Services: Construction Industry Scheme

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Accounting Services: Construction Industry Scheme

It is since April 6, 2007, the new CIS or Construction Industry Scheme is in effect. It has great impact on the taxation process of the contractors, the subcontractors and the self-employed workers in the construction industry in UK

The new CIS includes some changes implemented by the HM Revenue and Customs in order to ensure that the new sub contractors are registered with the HMRC or not and also for checking that whether the gross or net payments are required to be made or not.  There are certain rules for contractors and the subcontractors marked by the CIS. They are as follows,

Contractors

The new CIS has left very little room for the contractors for erring by setting the outcome to be a penalty arising automatically. There is no need to fill up the annual return of the CIS anymore. The only requirement is that a monthly return needs to be submitted. The return must outline the details of the payment made to the sub contractors. It is mandatory that the submission should be done not later than 14 days at the end of the tax month. With it the previous voucher system is replaced.

The employment status of all the listed workers must be declared in the monthly return. It is very important to submit returns within the month as otherwise a penalty is issued. Submitting the return both through the Internet and on paper is allowed.

Sub-Contractors

If you are already with the CIS, then there is no need for re- registration. In case, you are a new sub-contractor then a registration with the HMRC is necessary.

There won’t be the need of having the CIS registration cards or certificates but the responsibility is still vested on you to make sure that the registration with HMRC should be done properly. If you fail to do it then you won’t get the payment.

CIS can apply to all types of businesses that work in the construction industry in the UK. These include:

Now, let’s have a brief idea that what are the types of business to which the CIS is applicable. They include the following,

• Partnerships
• Limited Liability Partnerships
• Self employed individuals, who work as sole traders
• Companies

In case the business happens to be a construction business of traditional form, then also the CIS scheme is applicable to it. Such businesses include,

• Property developers
• Labour agencies and staff bureaux
• Gang masters or gang leaders

It might also be the case that if the organization is not involved in building work then also many a time HMRC refers to it as a deemed contractor. The company should be registered with CIS if it is spending more than £1 million a year on an average for construction purposes over a period of three years. The business types, which should be included, are,

• 'Arms Length' management organisations (ALMOs)
• Large businesses
• Housing associations
• Local authorities
• Public bodies
• Government departments

 Even if the business is based at a location outside UK but is operating in UK then also the CIS scheme is applicable to it.