The CIS payroll is a term that is referred to as pay contractor is paying to a subcontractor in the construction industry. CIS stands for Construction Industry Payroll; these are the rules made by the government, which every contractor needs to follow. This scheme is managed by HM Revenue and Custom department in the construction industry of the United Kingdom.
When a contractor is following the scheme, they have to deduct the amount they are giving to the subcontracts and need to pay the HM Revenue and Customs Department. The money we send to the department acts as the payment for the insurance of the subcontractors. In simple, the CIS Payroll scheme is made by the United Kingdom government so that subcontractors can have the National insurance.
For Whom the Scheme Applies
This scheme applies only to the organizations which provide the services of construction that are contracting companies. There are some organizations other than the contracting companies which need to follow the CIS Payroll scheme. If your organization is spending 1 million Euros annually on construction projects for three consecutive years, then your organization should cut some money and deposit in the Revenue and Custom Departments. For example, if your company has construction on the new branch for three years, then and the expenditure has crossed 1 million annually, then you are entitled to role under CIS payroll.
Which Companies need to register in the scheme?
There is a number of companies that need to enroll in the scheme, including the contractor’s companies. Here are some of the industries which list under the scheme except the common construction contractor organizations: –
- Housing Associations
- Local Authorities
- Labor Agencies
- Governmental Agencies
We have listed some of the industry which needs to enlist them under the scheme if there are involved in the construction activities. You need to register yourself with the department if you are merely involved with the construction job. Both a contractor and subcontractor need to register themselves so that the department can carry on the scheme. When you are registering yourself, you need to specify if you are a self-employed person, limited liability, and in-partnership or representing a company.
Different Rules for Different Business
As we know, every company involved in large scale construction need to enlist themselves in the CIS Payroll scheme. There are many businesses that can come under the scheme, but the rules are different for different types of organizations. By this, we mean the different structure of the business have different rules; some of the different structures are: –
- Self-Employed Individuals
- Limited Liability Partnerships
You may have doubts if your business is not based in the United Kingdom, but your organization is having construction on the united Kingdom land, then you have to list in the scheme or not. If the construction by your company is going on for three years and you are spending 1 million Euros annually, then you have to enroll in the scheme.
How to register under the CIS Payroll scheme?
We have discussed in what situation you can register under the scheme. Let’s discuss what the steps you should follow to register under the scheme: are –
- Register Yourself: – You have to register yourself with HM Revenue and Custom for the self-assessment. When you apply for a self-assessment, you will get a Unique Taxpayer Reference (UTR) number.
- Contact Officer: – As you get the UTR number, your next step is to contact the CIS officer and register under the scheme. So that you can register the deductions within the department of Revenue and Customs.
- Fill out the Forms: – If you are a self-employed subcontractor, then you have the freedom of working anywhere you want. There is a number of agents and firms which can help you to register under the department and can take the burden of filling out the administration forms and paperwork you need to do to register.
Numbers of agencies are available in the market, so you need to choose the best services. The agency you are choosing should be trustworthy and should have a good record. You can do the paperwork by yourself as well.
- Last Steps: – As you hire an agency, the process becomes easy and simple, but when you do that all by yourself, you can encounter some problems. Now your payments processed will have a CIS reduction as an advance payment for the Subcontractors.
If you are involved in large scale construction, then you may need to register under the CIS Payroll scheme. There is a number of agencies which can help you to resister within the department and the scheme. In this scheme, the payments provided to the contractor are deducted from the subcontractors’ national insurance.