How to Register For CIS in The UK?

Introduced by HMRC, the Construction Industry Scheme (CIS) is a tax deduction with the fundamental objective of regulating payments made from contractors to subcontractors in the construction industry. With the CIS, the government ensures that the subcontractors fairly contribute towards their tax obligations. Moreover, the CIS effectively prevents tax evasion by promoting transparency and ensuring compliance with UK tax laws. Therefore, the contractors and subcontractors associated with the construction industry must be familiar with the process of how to register for CIS in the UK to capitalise on its rewards.

 

 

A Quick Look At How The CIS Works?

By principle, under CIS, contractors deduct money from subcontractors’ payments and then pass it to HMRC. As a result, this payment serves as an advance tax for their subcontractors’ income tax and NI liabilities. Fortunately, the CIS scheme proves to be immensely advantageous for the workers linked with the construction industry since it ensures that their tax is managed both effectively and efficiently, reducing the risk of unexpected tax bills at the end of the financial year. What’s more, the CIS also helps contractors bolster their business credibility and stay compliant with HMRC tax regulations so that they will not have to bear the brunt of the penalties. Additionally, once deductions are made, contractors must pay CIS online through HMRC’s digital platform, which helps streamline the tax remittance process.

Who Needs To Register For The CIS?

In line with HMRC guidelines, both contractors and subcontractors are liable to know how to register for CIS because they both will register with HMRC if they meet the qualifying criteria. Let’s understand this with the help of the following directives under HMRC:

For Contractors:

A contractor must register for the CIS if:

• They are associated with or work in the construction industry as a contractor.
• They pay the subcontractors for completing the construction work.
• Their average annual construction expenditure surpasses or exceeds the  threshold of £3 million. For instance, the property developers or organisations that spend more than £3 million on construction work within a 12-month period necessarily register for the CIS.
• Their business is based in the UK.

For Subcontractors:

• Subcontractors are the individuals or businesses that provide construction services to contractors. It Includes self-employed workers, partnerships, and limited companies. Now, an individual would register as a subcontractor, if
• They perform construction work for a contractor.
• They can register as both, given they fall under both categories.

What Are The Tax Deduction Rates For The CIS?

It is significant to highlight that contractors must register for the CIS, it is not mandatory for the subcontractors to register. However, registration would always be beneficial for subcontractors irrespective of whether or not they need to register. For instance, if the subcontractors are not registered, deductions are made from their payments at a higher rate. More specifically, if the subcontractors are registered, the tax deductions from their payments will occur at the standard rate, which is currently 20%. On the contrary, unregistered subcontractors will face a tax deduction at a significantly higher rate of 30%. Consequently, subcontractors should register for the CIS even though it is not compulsory for them. Contractors can also conveniently pay CIS online, ensuring they meet deadlines and avoid penalties.

Accordingly, this guide outlines the step-by-step process to understand how to register for CIS for both contractors and subcontractors. Also, to learn more about the Construction Industry Scheme, you can read our guide:

• A guide to what is the Construction Industry Scheme (CIS).

How To Register For CIS?

The following steps elaborate on how to register for CIS:

Provide Necessary Information:

To register for CIS, you must ensure to gather the following information:

Unique Taxpayer Reference (UTR):

A UTR is a 10-digit number that HMRC provides you when you register for self-assessment tax returns. However, in case you do not have a UTR, it is important that you apply to get it before registering for the CIS. Besides, a UTR is required for both contractors and subcontractors.

National Insurance (NI) Number:

• Your NI is your identifier that HMRC uses for social security and tax purposes in the UK.

Government Gateway Account:

• Government gateway login is used to access HMRC online tax services.

Company Registration Number (CRN):

• Notably, a CRN is a unique identifier or registration number issued by Companies House immediately upon incorporating a limited company.

Business Details:

• It includes your business name, office address, and contact details.

Bank Details:

• You will also have to provide your bank details for tax deductions and payments.

Subcontractors Verification:

• It is crucial for contractors to verify the subcontractors’ status with HMRC to ensure they deduct the right amount of tax from their payments.

Register Online with HMRC:

Fortunately, HMRC has facilitated you by allowing you to access the CIS registration form via its website. You can find and fill out a CIS registration form by navigating the Construction Industry Scheme section. You can sign up by using your Government Gateway credentials. Then, you will simply follow the prompts to register yourself either as a contractor or subcontractor. For those lacking a Government Gateway account, they can create one during the course of the registration process. Next, you will fill out the registration form by entering all the aforementioned information. It is necessary that all the details are accurate and updated to avert any unnecessary deferments. Thereafter, you will submit your application and wait for HMRC confirmation.

Verification process:

Once HMRC  processes your registration, they might reach out to you to run a few verification checks which may take a few days. Additionally, they might also ask you to submit additional documents for the purpose of verifying your application. Eventually, after your registration application is successfully processed by the HMRC, they will send you a confirmation letter or an email containing your unique CIS reference number.

Now, you must maintain a record of this number since you will need to use it in all your contacts with HMRC regarding the CIS.

Meet the CIS Deadlines:

Before hiring subcontractors to complete the construction work, it is crucial that they verify new subcontractors before the first payment.

Now, the following deadlines are important to take note of:

• Monthly CIS returns are due by the 19th of each month.
• The tax deducted must be paid to HMRC by the 22nd of each month if you pay CIS online using HMRC’s payment services.
• The annual self-assessment tax returns deadline is 31 January 2025.

Submit monthly returns:

The contractors must also remember that they will be liable to file monthly CIS returns with HMRC when understanding how to register for CIS. The tax deductions made from the subcontractors’ payments must be paid to HMRC by the 19th of each month since any deferment or delay caused in submitting returns may lead to penalties.

Keep accurate records:

Further down the line, it is also vital for contractors to maintain records of subcontractor payments, deductions, and invoices. They must also verify that all payments match the CIS monthly return submissions. It is also worth pointing out that the contractors are advised to keep records for at least three years as tangible evidence in case HMRC conducts audits in the future.

What is Gross Payment Status (GPS)?

While learning how to register for CIS and the tax deduction rates that vary with being registered or an unregistered subcontractor, it is important that they know about Gross payment status as well. Luckily, some subcontractors can apply for Gross Payment Status (GPS) to receive full payments without having any deductions made to their compensations. As per the HMRC directives, a subcontractor can apply for gross payment status when they register for CIS. As an outcome of the GPS,  the contractor will not make any deductions from their payments, and they can pay their income tax and National Insurance liabilities at the end of the tax year.

However, in order to qualify for GPS, a subcontractor must:

• Have paid all taxes on time.
• Have a business bank account.
• Earn at least £30,000 annually (for sole traders) or £100,000 collectively (for partnerships or companies).

To learn more about Gross Payment status, you can visit the government website:

 

 

Conclusion:

Overall, understanding how to register for CIS is immensely significant not only for contractors and subcontractors but also for self-employed individuals and businesses associated with the UK construction sector. In addition, knowing the nuts and bolts of the registration process can help the contractors and subcontractors identify how much tax is owed to fulfil the compliance requirements, manage tax obligations effectively and avoid penalties.

Secure a Seamless CIS Registration with Payrollservices Accountants:

It is worth pointing out that if being a contractor, you are bereft of time to be mindful of the registration deadlines, an accountant can be a life saviour for you in this regard. To clarify, highly skilled and certified accountants at payrollservices.accountants can ensure timely registration and accurate record-keeping for your businesses so you can operate hassle-free and smoothly while complying with HMRC regulations for the 2024/25 tax year.

Notably, our accountants will ensure your registration with HMRC and then make deductions from payments made to your subcontractors. Similarly, they will also carry out the task of verifying the employment status and tax details of your subcontractors with HMRC. We’ll also guide you through how to pay CIS online securely and on time, so your tax submissions are always in order. Last but not least, our accountants will ensure that they submit your monthly CIS returns to HMRC, detailing payments made to subcontractors and their tax deductions.

Hence, contact us today and make your CIS registration smooth sailing.

Disclaimer: Please note that the information provided in this blog is exclusively for informational purposes and should not be considered financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.