Nick Pilgrim, EEBS Managing Director, helps you the with the misunderstandings and foibles that surround the Construction Industry Scheme (CIS) and what falls inside and outside of CIS…
I hope it comes to no surprise for you to hear that at EEBS we take our CIS responsibilities very seriously. We thought it would be beneficial to share some of the common CIS misunderstandings and foibles that pop up regularly with clients, so in no particular order…
- Expenses are taxed – the regulations say that all payments other than material costs must be taxed at the relevant CIS deduction rate. So, unless a sub-contractor holds gross payment status their expenses must be taxed, and they can only claim the tax relief when submitting their annual accounts.
- The only self-employed professionals fully exempt from the CIS regulations are either non-construction related (so, for instance your accountants) or surveyors and architects – unless they go beyond the design process and act as an on-site project manager, then they will be subject to the CIS.
- If any other self-employed individual providing “professional services” is involved in the day-to-day running of a project, no matter what their role ( e.g. Project Design Manager) they are still subject to the CIS – unless they are purely consultative and have no active involvement with the running of a job – under those circumstances they are outside of CIS!
- And if the contract requires them to perform both roles, then yes, you’ve guessed it – CIS applies to the whole contract.
- CIS applies to the installation of heating, lighting, air-conditioning power supply etc – but not to maintenance or repair. So, fitting a new boiler is outside of CIS, but fitting a whole central heating system is in. Replacing a defective spur and fitting new sockets is outside CIS, but a full domestic rewire is in!
- The hire to clients of plant and equipment is outside CIS, as is its delivery to site – But if you hire-out plant and equipment that you own with an operator the whole invoice is subject to CIS!
- If you are the client engaging that sub-contractor who supplies plant, equipment and operators the whole of the invoice that you pay must be subject to CIS unless the sub-contractor has hired the plant and equipment – then the sub-contractor is entitled to identify the hire as a material cost, and to be paid gross for that element of the invoice.
- And if you are the sub-contractor in the above arrangement, any uplift you charge on the hire cost to the client (so if your hire cost was £1000, and you charged the client £1100) the £100 profit is subject to CIS deduction.
- If you are the client in the above arrangement, we have seen examples where some sub-contractors identify a nominal part of the labour charge as part of the hire (say 50%) – this is not allowed under the CIS regulations! Indeed, if you were subject to an HMRC inspection and had agreed with those arrangements you would be liable for an additional CIS deduction on the 50% labour charge.
I didn’t say it was simple!!
As ever should you require any help or advice, or further clarification, do not hesitate to contact The EEBS CIS Payroll Team. EEBS provide HMRC compliant payroll solutions.
For further information on EEBS visit https://eebs.co.uk/
