Construction industry Scheme
CIS stands for Construction industry Scheme. This scheme contains rules set out by HMRC on how subcontractors working within the construction industry should be paid. If you are a subcontractor, which many small businesses (especially sole traders) are in the UK, then you will need to register with HM Revenue and Customs (HMRC).
If you are company and you decide to use a subcontractor who is CIS registered then it is your responsibility to account for their tax. Currently 20% tax will be deducted from the subcontractors invoice, this may well be stated on their invoice. This will normally be held within your accounts being posted to a holding account giving details of the subcontractor and then be paid by you over to HMRC the following month.
Complying with CIS
As a company using the services of a subcontractor you have certain responsibilities to record their transactions and submit monthly returns to HMRC. It is important that you make yourself and anyone within your company who deals with the companies transactions on a daily basis aware of your obligations to record these transactions and payments correctly.