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Construction Industry Scheme (CIS)

Tax – Construction Industry Scheme – CIS – HMRC Announcement 12th November, 2020

Contractors employed in Construction work must register with CIS. The CIS Scheme covers most construction work and contractors who pay subcontractors must be registered.
 
From 6th April, 2021 the CIS Scheme is set to change. Four changes are planned. These, in summary, are:-
 
1 – CIS Set Off Amendment Power
2 – Cost of Materials
3 – Deemed Contractors
4 – CIS Registration Penalty
 
In brief this means, that from the 6th April 2021,
 

  • Where HMRC is dissatisfied with the evidence provided to support a set off claim by an employer against his liabilities, then HMRC will amend the CIS deduction figure on the EPS.
  • Only materials directly bought for that specific contract will be allowable as a reduction in the gross payment in order to determine the tax liability.
  • The time periods currently set to review whether a non-construction business whose spend on construction exceeds the £1m average threshold must shorten and a review of their tax position must occur on a more regular basis.
  • The scope for HMRC to inflict financial penalties to any person deemed influential in the decisions as to how to declare CIS liabilities is being widened.

HMRC’s explanation and summary of these changes can be found on the HMRC’s website search: Changes to tackle Construction Industry Scheme abuse.


Overview

The Construction Industry Scheme (CIS) sets out the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry and excellent information is available from the HMRC website. 

The tax authorities provide the industry with a number of on-line support services. For a full introduction to how CIS may affect you, please visit the HMRC website. 

HMRC provide a guide to CIS for Contractors and Subcontractors (Re: CIS 340). 

While considering Tax Status, it is important to check the employment status of your subcontractors. You can do this by completing the on-line status indicator (ESI) found on the HMRC website. 
 

Further Assistance 

Members who have a specific problem that cannot be answered utilising online resources, are encouraged to contact us at - candc@eca.co.uk . (The Enquiry should provide the Member’s full business title, Membership Number, primary point of contact and a range of times when contact can best be made.)
 
ECA has made special arrangements with a Tax Advisor to provide specialist advice and will administer any enquiry that members raise.