Are you working as a contractor? If you are, then you can use Construction Industry Scheme (CIS) to deduct tax from payments relating to your construction work.
This scheme applies to businesses involved in the construction industry including builders, property developers, tradesmen, and agencies supplying workers. Whereas the specific types of work related to the construction industry like carpet fitting, delivering materials and professional work done by architects and surveyors are not covered by this scheme.
Being a contractor, you must register with HMRC if you pay your subcontractors and spend an average of more than £1 million per year in construction work for the last three account ting periods. Your subcontractor must also register with HMRC. However, if you fall under both categories, you must register as both contractor and subcontractor under CIS.
Contractors should also make monthly CIS returns to HMRC showing payments to the subcontractors and deduct tax from their pay and pay such tax to HMRC. On the other hand, sub-contractors should make annual self assessment tax returns on which relief can be claimed.
For avoiding any penalties, you need to ensure to keep records up-to-date but submit returns on time. As this type of can be very complex, get in touch with our Exclusive Accountants at 020 8570 5409 for expert advice on this scheme.