Registering As A Contractor
If your business is involved in construction and it engages self-employed workers, the business will likely need to register with the Revenue as a contractor. The main effect of being a contractor is tax must be deducted from non-employee construction workers, whether the labour is provided by self-employed people or limited companies. You must file monthly returns with the Revenue informing them of the payments made to subcontractors and the tax deducted, which must be paid to the Revenue along with tax and National Insurance deducted from your employees (if you have any).
Contractor requirements apply to a wide range of situations (not just construction companies) and include the following:-
- The rules apply no matter what your business’s legal structure is. Limited companies, partnerships and sole-traders are all caught by the legislation
- Organisations that spend £1 million per year over three years are “deemed” contractors and are required to register as such. This covers government departments and housing associations, for example
- Property developers must also register for contractor status. This can be over looked by builders as they might not necessarily think that renovating and selling property comes under the construction industry scheme.
There are some exceptions. Those in the following circumstances do not need to apply for contractor status:-
- building work being paid for by a charity or a trust
- work done by a business on a property that is for the business’s own use
- if the construction contract is worth less than £1,000 (excluding materials) you can call the CIS helpline to get an exemption
- jobs such as architecture and surveying, scaffolding hire (with no labour), carpet fitting and delivering materials are all exempt from the construction industry scheme’s requirements
If you have determined you should apply for contractor status, you can do this on the Revenue’s website by registering as an employer.
Any workers you engage should register as sub-contractors with the Revenue if they haven’t already done so.
Once your business is registered as a contractor, you should then “verify” your subcontractors which is done using the Revenue’s CIS online service or by calling the CIS helpline. The process checks the subcontractors have registered for CIS. You will need to provide the sub-contractors’ details such as their legal business name (or, if different, the trading name the sub-contractor provided the Revenue when they registered as a sub-contractor), their 10-digit “unique tax reference” (UTR), national insurance number and/or registered company number.
The above needs to be done in good time time before you pay the subcontractors. This is because you must usually deduct tax from the labour element of the sub-contractor’s pay, as follows:-
- For registered sub-contractors – ie those you’ve been able to verify – 20% tax is deducted
- Some sub-contractors (particularly limited companies working for you) might have “gross status”. This means you pay them gross and so deduct 0% tax. You must still pay them via CIS even if they have gross status
- For workers you have not been able to verify, you must deduct 30% tax. This situation might arise for newly self-employed workers who haven’t yet registered as self-employed or as a sub-contractor.
Tax is only deducted from the labour being charged
You must keep your CIS records for at least three years after the end of the tax year to which they relate. You can be fined up to £3,000 if you cannot produce CIS records if the Revenue request them.
If you would like any guidance in respect of your CIS requirements, please do not hesitate to contact us.