What is the Construction Industry Scheme?
The Construction Industry Scheme (CIS) is probably the most safeguarded and regulated scheme in the U.K. tailor made for contractors to pay subcontractors within the construction industry. The government is very precise about which data they want and when they want it. Large fines can build up fast within the Construction Industry Scheme should HMRC’s guidelines and deadlines not be met.
The Construction Industry Scheme is a payment scheme built for construction workers and is the industry standard for construction work within the U.K. All contractors and subcontractors will register for CIS. A contractor can apply here, while a subcontractor can apply here.
Obligations within the CIS
If you are a contractor operating within the CIS, your duties include, but are not limited to:
Monthly CIS returns
Every month you must send HMRC a complete list of all payments broken down, made to subcontractors within the scheme in the preceding month. If returns are not submitted before the deadline you risk incurring a fine.
Ensuring data is correct
HMRC demands perfection with your submissions – if you find an error in your payments you have a set time to notify HMRC of the errors and rectify them. While they understand that mistakes can be made, and graciously give you a fourteen day period to correct the mistakes, you shouldn’t make a habit of getting on HMRC’s bad side.
Ensuring data is safe
It is imperative that you keep your data safe and secure. GDPR is clear about how to handle personal data and as a contractor in the CIS scheme you are going to have even more personal data to handle than a regular PAYE employer would. HMRC may also decide to check your subcontractor details at any time and fines for incomplete payment data carries a fine up to £3,000.
Monthly HMRC payments
Every month you must pay the amount deductible from ‘payments to subcontractors’ to HMRC within 14 days of the tax-month ending. Any outstanding fines will likely be requested to be paid at the earliest monthly payment and will often be in full.
Penalties
If you are a contractor operating within the CIS, your duties include, but are not limited to:
Penalties for late monthly returns
taken from www.gov.uk
“If a contractor fails to submit a monthly return on time, we’ll charge them the day after the filing date - a fixed penalty of £100.
If the return is still outstanding, we’ll charge a:
second fixed penalty of £200 - 2 months after the filing date
tax-geared penalty which is the greater of £300 or 5% of any deductions shown on the return - 6 months after the filing date
second tax-geared penalty which is the greater of £300 or 5% of any deductions shown on the return, (where we believe information has been deliberately withheld, this penalty will be higher) - 12 months after the filing date”
Penalties for incorrect returns
taken from www.gov.uk
“If a contractor submits a monthly return that is incomplete or incorrect, we may charge penalties where we believe the error or omission has been caused by negligence or intent on the part of the contractor.
Incomplete or incorrect returns include:
persons or payments omitted from the return
persons or payments incorrectly entered onto the return
failing to make a declaration in respect of verification or employment status
incorrectly making a declaration in respect of verification or employment status”
Penalties for missing records
taken from www.gov.uk
“If a contractor fails to produce records relating to payments made under the scheme when asked to do so, we may charge penalties up to £3,000.
We may charge contractors penalties of up to £3,000 if they:
fail to give statements to subcontractors registered for payment under deduction, recording their payments and deductions
negligently or deliberately provide incorrect information in such statements”
To summarise
HMRC cares a lot about deadlines and accuracy of submissions and shows it by implanting hefty fines for both late payments and incomplete data. If you hire us we can ensure that everything is taken care of in a timely manner. We are extremely experienced with HMRC legislation and keep up-to-date on all industry news and government plans.
Hiring Avalon Payroll to manage your CIS administration will take a huge weight off your shoulders, freeing you up to focus on other aspects of your business.
