Working as a contractor in the UK is booming with thousands of UK professionals taking over contract job roles over regular jobs. However, managing and filling VAT and company returns can be an added workload for contractors who trade using a Limited Company.
But on the brighter side of things, for contractors in the UK, working under an umbrella agency is a boon especially when you don’t want to get involved with the hassle of managing a Limited Company. An Umbrella company can eliminate the workload of owning a limited company complying with the taxman.
Umbrella companies are already helping numerous contractors. And today we will be shedding light on HMRC’s Construction Industry Scheme and how working under the Reliasys Umbrella can benefit you.
Let’s get started.
What is CIS?
CIS or the "Construction Industry Scheme" was proposed by the HMRC as a helping hand to the self-employed workers within the Constructuion industry. The scheme is designed to efficiently manage the payments made by contractors to subcontractors, thereby, minimising tax evasion & tax avoidance within the construction industry
How does the CIS work?
The CIS works quite similar to the PAYE services wherein the contractor deducts 20-30% of a self-employed subcontractor’s payment right at the source. The deducted amount goes straight to the HM Revenue and Customers (HMRC). The scheme doesn’t apply to the regular employees.
The deducted amount serves as an advanced contribution towards the subcontractor’s tax and National Insurance. The scheme works to ease-off the year-end tax burden off the subcontractor.
While it is not necessary for subcontractors to be registered under the scheme, it is necessary for contractors to register for the scheme. In order to qualify for the registration, contractors must either
- Pay their construction subcontractors or
- Have an annual average expenditure of more than £1 million on construction work within a 3-year period.
Work Covered by CIS
CIS covers almost all of the construction work including:
- Civil engineering work (e.g. roads and bridges)
- A permanent or temporary building or structure
Other construction work for the purpose of CIS includes:
- Preparing the site (like laying foundations)
- Dismantling and demolition
- Building work
- Repairs, decorating and alterations
- Installing systems (e.g. heating, lighting, power, water and ventilation)
- Cleaning work required after construction work
Who counts as a contractor or subcontractor
The prime difference between a Subcontractor and Contractor is that a contractor is directly employed by the employer whereas a subcontractor is employed and paid by the contractor.
What is the rate of deduction?
The rate of deduction is as follows:
- 20% (excluding VAT and materials) - for subcontractors who are registered under the CIS Scheme.
- 30% (excluding VAT and materials) - for subcontractors who aren’t registered under the CIS Scheme.
Working through Reliasys Umbrella
While our umbrella is registered with HMRC for CIS, working under the Reliasys Umbrella offers many other perks too. Some of them are:
- You will work under the Reliasys umbrella as a subcontractor
- You will be having an ‘Employed’ status under the PAYE
- Tax and NI are deducted will be on your behalf
- You are eligible to gain Tax and NI relief on expenses every pay day
- You will be covered for EL and PL
- Cost effective and hassle free
- No payroll or accounts expertise are required as such
- Text message confirming the gross and net payments made on payday
- No need to worry about a tax return at the end of the year