Accountants for
Contractors

Anyone who pays subcontractors for construction work. That includes obvious construction businesses, but also so-called deemed contractors — businesses outside construction that spend more than £3m on construction operations in a rolling twelve-month period.

If you are unsure whether the scheme applies to you, it is worth checking properly. Operating outside CIS when you should be inside it creates a liability for the deductions you failed to make.

20% for subcontractors registered under CIS, 30% for unregistered ones, and nothing for those holding gross payment status. Deductions apply to the labour element only — materials, plant hire and VAT are excluded, provided the invoice separates them.

The money is not an extra tax. It is an advance payment against the subcontractor’s eventual Income Tax and National Insurance, and it is set against their bill at the end of the year.

As a sole trader subcontractor, the deductions suffered during the year are offset against your Self Assessment liability, and any excess is refunded. Because deductions are taken before expenses, most subcontractors end up owed money.

Limited company subcontractors reclaim differently, by offsetting CIS suffered against their PAYE liabilities through the payroll system rather than waiting for a year-end refund. We handle whichever route applies to you.

Gross payment status means contractors pay you in full with no deduction, which is a substantial cash flow advantage. To qualify you must pass a business test, a turnover test and a compliance test — broadly, you need a genuine construction business, turnover above a minimum threshold, and a clean record of filing and paying on time.

HMRC reviews the status periodically and can withdraw it for compliance failures. If you are close to qualifying we will help you apply and, more importantly, help you keep it.

An online return for the tax year ending 5 April must be filed by 31 January the following year, and any tax owed is due the same day. Paper returns are due earlier, by 31 October. If you also make payments on account, the second one falls due on 31 July.

We aim to have returns finished well before Christmas so you know your January figure in good time.

You generally need to file if you were self-employed with turnover over £1,000, received rental income, are a company director taking dividends, made a capital gain above the annual exempt amount, or earned over £50,000 while you or your partner claimed Child Benefit.

If you have had a notice to file from HMRC you must submit a return even if you owe nothing, until HMRC withdraws the notice. If you are not sure, ask us — it takes five minutes to check.