What is the Construction Industry Scheme?
The CIS and its many functions
The Construction Industry Scheme (CIS) is a government-run scheme which sets out the regulations for payment of subcontractors for the construction work managed by contractors within the construction industry.
The scheme is primarily applicable to contractors and subcontractors within mainstream construction, although companies whose primary objective is not construction with a high annual spend on construction may also full under the scheme's specification.
Checking whether the Construction Industry Scheme applies to you
To find out if the Construction Industry Scheme (CIS) applies to your business, and if you count as a contractor, subcontractor, or both under the scheme, see below.
The Construction Industry Scheme (CIS) is made up of a framework of rules for managing finance and payments made to subcontractors by contractors for work in construction. If a company operates in the construction industry or carries out construction-related work, then it is possible that registration with HM Revenue & Customs (HMRC) is necessary, either as a contractor or a subcontractor, under CIS.
A select few other businesses and organisations may require registration with HMRC as contractors in the event that an excess of a certain annual amount is spent on 'construction operations' covered by the scheme. This may be required even if the primary activity is entirely separate from construction.
Contracts and business structures covered by CIS
The Construction Industry Scheme (CIS) can be applicable to many types of business working within the UK construction industry. Examples of those eligible for cover include:
- soul trader self-employed individuals
- businesses
- partnerships
- limited liability partnerships (LLPs).
In addition to traditional construction businesses i.e. builders, also applicable to the scheme are the following examples:
- gangmasters - or gang leaders
- labour agencies and staff bureaux
- property developers.
In the event that a business or organisation does not carry out building work, it may still be classed as a mainstream contractor or HM Revenue & Customs (HMRC) may class it as a 'deemed contractor'; registration with CIS is necessary in the event that a business spends in excess of an average of £1 million annually on construction operations throughout a three-year period. The forms of companies and organisations that could be included are:
- some large businesses
- other 'arm's length' management organisations
- local authorities
- government departments
- other public bodies
- housing associations.
For business with bases operating externally to the UK, CIS cover is still applicable in the event that work is carried out within the UK, or UK territorial waters.
However, for companies based externally to the UK planning to carry out construction work covered by the scheme, CIS registration is initially required. Contact the HMRC Charity, Assets and Residence (CAR) CIS Team on Tel +44 151 472 6273 to register prior to UK construction.
Work carried out by companies and organisations covered by CIS may be done by contractors, subcontractors, or in some instances both. HMRC operates under a broad definition of terms for contractors and subcontractors, meaning that subcontractors and contractors in the non-traditional sense are often also covered.
Construction law - a guide
Construction law is a set of legal requirements, guidelines and laws that ascertain the rules in regards to contracted labour in the building sector.
Contracts and construction
A construction contract outlines the agreement between two parties who are planning to embarking on a project involving some form of construction.
Disputes in the building realm
As time has gone on, the laws regarding the construction industry in the UK have evolved considerably in order to cope with situations which may arise.