I’ve often heard questions from my customers who are Contractors, who were confused about the CIS Scheme and threatened by their subcontractors! 

A few examples of those questions were:

1. My subcontractor doesn’t want us to deduct the CIS tax from his bill. What should we do?

2. My subcontractor doesn’t want the CIS to be deducted. Can we account for the bill as materials?

3. My subcontractor doesn’t want the CIS to be deducted from the travel and subsistence cost, so they put it as a separate line on the bill. Is this correct, or shall we deduct the CIS?

4. My subcontractor doesn’t want to be employed, although we think he should. He said he’d leave if we wanted to employ him for our project. 

Educate yourself before you put those demands on your Contractor because the Contractor risks penalties and HMRC investigations.

1. CIS, the Construction Industry Scheme, is a legal requirement in the U.K. Your contractor must deduct the correct CIS tax whether you like it or not. And if you don’t like it, check if you’re eligible for a gross status. 

2. Costs such as travel and subsistence are part of your service; therefore, unless you bill for materials, all your labour costs are subject to CIS tax, and your labour rate must include your business costs. 

If your contractor reimburses you for the accommodation and pays for it, and only if you provide a receipt to your contractor- original - not a copy- such a situation will be acceptable. 

3. Costs incurred as materials must be materials you buy and agreed with your contractor. A made-up bill showing an unrealistic amount for materials and no labour puts a Contractor at risk, as HMRC may impose a penalty.

4. The employment status is a big subject, but it's a Contractor taking the risks of allowing one as a subcontractor who should be employed. 

A subcontractor has a business, incurs risks, and manages insurance, work, and costs. 

CIS Scheme is real and is to be implemented and treated seriously. It’s the Contractor who incurs higher risk. 

We are here to help and support the Contractor and Subcontractor in operating safely within the CIS Scheme.

Please feel free to contact us if you have any questions about the CIS Scheme.

Do you experience similar issues?