The CIS requires contractors to deduct money from subcontractors’ payments for income tax and National Insurance and pass it on to HM Revenue and Customs (HMRC). This system is intended to ensure that subcontractors pay the correct amount of tax and National Insurance on their earnings.
The CIS applies to all construction work carried out in the UK, including repair, maintenance, and renovation work, and it affects both self-employed workers and limited company contractors.
How does the CIS Scheme work?
- CIS covers most construction work. See the HMRC page for the work covered.
- the contractor is is required to withhold tax on its payments to you, at either 20% if you are ‘registered’ or 30% if you are not.
- Register for the Scheme as subcontractor
- Not everyone who works in the construction industry is self-employed so you need to check your employment status
- If the tax deducted by your contractor is more than your tax liability, you will be due a tax refund
What expenses can you claim?
- Car and van expenses. If you use your car for work 75% of the time then you can claim 75% of leasing payments, fuel, car insurance, road tax, etc.
- Alternatively you can claim mileage allowance for all business journeys
- Tools and equipment such as drills
- Protective vests
- Protective gloves
- Safety helmets
- Mobile phone
- Stationery and postage
- Travel and subsistence (if you incur these costs yourself)