CIS Payroll

06 Feb 2024

What is CIS Payroll?

For those currently engaged as contractors in the construction industry, enrolling in the Construction Industry Scheme (CIS) is a prerequisite. Developed and coordinated by HM Revenue and Customs (HMRC), CIS payroll serves as a tax-deduction scheme, allocating funds for income tax, national insurance (NI) contributions, and additional deductions.

To streamline the payment of tax and national insurance, the UK government formulated the Construction Industry Scheme, aiming to alleviate the administrative burden typically associated with payroll management.

Adhering to the mandatory rules governed by the scheme, contractors are required to deduct tax and National Insurance from a subcontractor’s payment and utilise it for remittance to HMRC. This payment is deemed an "advance," eliminating the need for subsequent tax calculations.

Even in the absence of CIS, mandatory deductions for tax and National Insurance are applied to all employee wages. The CIS payroll, in conjunction with the scheme, simplifies compliance, enabling contractors to issue payments to subcontractors without the risk of errors.

To learn more about what the Construction Industry Scheme is read this article.

Applicability of CIS Payroll

CIS payroll, established by HM Revenue and Customs (HMRC), is a UK policy defining the payment structure for subcontractors within the construction industry. Enrolling in CIS is not optional; eligibility is determined by specific criteria:

  • Your projects or workforce heavily rely on subcontracting.
  • Your firm exceeds £1 million in construction spending over three years.

To confirm eligibility, a comprehensive check can be conducted under Section 2.2 of the CIS guide provided by HMRC. It is essential to note that the term 'contractor' in the context of CIS has a broader meaning than its general usage in the construction industry.

The scheme applies to the UK's construction industry, encompassing various activities such as site preparations, miscellaneous construction tasks, site decoration, building refurbishments, demolition, and alterations. While some businesses may fall outside this industry, those heavily involved in construction operations are likely required to enrol in the Construction Industry Scheme.

Exemptions from CIS

It is crucial to study CIS eligibility as certain workers involved in construction projects may be exempt. Specialists like architects and surveyors fall under this category. Freelancers engaged in construction projects should liaise with their contractors or assess their contribution to determine if enrolment is necessary.

Understanding CIS Payments

Utilising CIS payroll is essential to ensure compliance and facilitate the issuance of payments to subcontractors. Payments made through CIS payroll involve appropriate deductions, with a standard tax rate of 20% for registered subcontractors and a higher rate of around 30% for those unregistered.

Simplified CIS Payroll with Contractwise

Contractwise’s robust CIS payroll supports the entire process of managing and paying a subcontracted workforce under CIS. From calculating and paying CIS subcontractors to issuing monthly statements and verifications, Contractwise simplifies the complexities of CIS payroll, ensuring compliance and accuracy in payments.

To learn more about how we can help, simply contact us today.