The Construction Industry Scheme (CIS) was introduced to tackle tax evasion in the construction industry, and it has been successful in ensuring that everyone working in the construction industry pays their fair share of tax.
It sets out the rules for contractors and subcontractors, ensuring that tax is correctly deducted at the source before payments are made. CIS was designed to improve tax compliance and streamline the collection of tax revenue, ultimately reducing the risk of non-payment and fostering a more transparent system.

As a contractor in the construction industry, you're probably aware of the Construction Industry Scheme (CIS), but have you ever wondered where and when it all started? The CIS Scheme was introduced to regulate the payment of contractors and subcontractors in the construction industry and has been around for two decades now. In this post, we'll take a closer look at the birth of the CIS Scheme and how it has evolved over time.

The Start of The CIS Scheme
The CIS Scheme was first introduced back in April 1997, by the Inland Revenue. The scheme was initially developed to tackle tax evasion in the construction industry. The idea was to ensure that subcontractors in the construction industry were paying their fair share of tax. The CIS Scheme means that payments made to subcontractors must be reported to HMRC , and that payments be made minus the deductions for tax and national insurance.

The Importance of The CIS Scheme
The construction industry has always had a large number of self-employed workers who were not always declaring all their income for tax purposes. Before the CIS Scheme was introduced, the Inland Revenue found it challenging to differentiate between contractors and self-employed workers in the construction industry, and as a result, there was a large amount of undeclared? The CIS Scheme aimed to ensure that everyone working in the construction industry paid their fair share of tax.

The Early Years
Initially, the CIS Scheme was quite a complex system. Contractors had to register with HMRC, and payments had to be reported every month. Contractors were also required to issue monthly deduction statements to their subcontractors. However, in 2007, the scheme was improved to make it simpler to use. The amendments included fewer registration requirements and reduced penalties for non-compliance.

Modern Day
In 2014, further changes were made to the scheme. The amendments included reducing the number of years' history that contractors and subcontractors needed to provide during registration, Quicker processing of application forms, and a more straightforward rejection and appeals process for unsuccessful applications.

The Construction Industry Scheme (CIS) was introduced to tackle tax evasion in the construction industry, and it has been successful in ensuring that everyone working in the construction industry pays their fair share of tax. Over the years, the CIS Scheme has undergone several changes, making it simpler to use for both contractors and subcontractors. Today, the CIS Scheme has become an integral part of the construction industry in the UK and remains a key component in the regulation of payment for contractors and subcontractors. As a contractor in the construction industry, it is essential to understand the history of the CIS Scheme and how it has evolved to ensure that you stay compliant with the scheme's requirements.

The Construction Industry Scheme (CIS) was introduced to tackle tax evasion in the construction industry, and it has been successful in ensuring that everyone working in the construction industry pays their fair share of tax. Over the years, the CIS Scheme has undergone several changes, making it simpler to use for both contractors and subcontractors. Today, the CIS Scheme has become an integral part of the construction industry in the UK and remains a key component in the regulation of payment for contractors and subcontractors. As a contractor in the construction industry, it is essential to understand the history of the CIS Scheme and how it has evolved to ensure that you stay compliant with the scheme's requirements.

Understanding CIS and Expenses
The Construction Industry Scheme (CIS) is a tax deduction scheme which involves tax being deducted at source from payments made from contractors to subcontractors. It is designed for those working on construction sites, and the deductions count as advanced payments towards the subcontractor's tax and National Insurance. But within these industry-specific tax deductions are opportunities for contractors to claim expenses that can reduce their tax liability.

Expense claims are an essential aspect of managing your income and keeping your finances in order. By correctly identifying and claiming the expenses that you are entitled to, you can significantly reduce your tax bill and ensure that you only pay the tax you owe. However, it is crucial to understand the limits and conditions around what constitutes a valid and allowable expense.

Expense Claim Checklist
Below is a comprehensive checklist of possible expenses that CIS contractors should consider when preparing their tax returns:

Travel Expenses
Transportation costs can be some of the most substantial expenditures for contractors, especially when working on various sites. Travel expenses eligible for deduction include:
• Mileage: Whether using a personal vehicle or a company car, you can claim a fixed rate per mile for business travel. It's wise to keep a detailed mileage log.
• Public Transport: The cost of public transport, including trains, buses, and taxis, can be claimed if used for business purposes.
• Overnight Accommodation: When a job requires you to stay overnight, you can include the cost of accommodation, as well as meals and other incidentals.

Subsistence Costs
Subsistence expenses refer to the costs of food and drink while working away. These can often be claimed in situations where accommodation is also a valid expense. Keep receipts and a log of where you were and why.

Tools and Equipment
Contractors are often responsible for their own tools and equipment. Anything you purchase for work purposes can often be claimed as an expense. This includes:
• Safety Equipment: High-visibility vests, hard hats, and other safety gear are essential and can be claimed.
• Tool Maintenance: The cost of repairing and maintaining any tools or personal protective equipment (PPE) can also be included.
• Consumable Items: Items such as screws, nails, and oil that are used and replaced can count as legitimate deductions.

Office Expenses
Running a home office or a workspace for business use will incur various expenses, all of which can be considered for tax relief:
• Rent or Mortgage Interest: If a portion of your home is used regularly and exclusively for business, a percentage of the rent or mortgage interest may be allowable.
• Utilities: Gas, electricity, water, and other utility bills for a dedicated business area can also be claimed.
• Office Supplies: From stationery to technology, anything you need to operate your business is typically deductible.

Legal and Financial Costs
Professional services used to run your business, such as legal or accounting fees, may be eligible for tax relief. This could include fees for preparing your accounts, professional advice, or services like collecting debts or writing a will.

Training and Development Expenses
Any training, certification, or professional development courses that are directly related to your work can usually be claimed. This could be formal education or industry-specific courses.

Marketing and Advertising
If you spend money on advertising or marketing your business, you can generally claim these costs. This might include website development, business cards, or online advertising.

Insurance
Insurance to cover your business against various risks, from public liability to professional indemnity, is often deductible. Be sure to differentiate between personal and professional policies.

Subcontractor Payments
If you work with subcontractors, the payments you make to them can be claimed as a business expense. Keep records of these payments, including all relevant details of the subcontractors' names and addresses, and the amounts paid.

Depreciation and Asset Write-Offs
Capital allowances allow you to claim tax relief on certain types of asset, usually over a period of time. This means the depreciation of your assets can be counted as an expense.

We are an Accountancy firm and will ensure every legitimate expense you are entitled to you claim.

CIS covers most construction work to:
• a permanent or temporary building or structure
• civil engineering work like roads and bridges
For the purpose of CIS, construction work includes:
• preparing the site - for example, laying foundations and providing access works
• demolition and dismantling
• building work
• alterations, repairs and decorating
• installing systems for heating, lighting, power, water and ventilation
• cleaning the inside of buildings after construction work
Exceptions
You do not have to register if you only do certain jobs, including:
• architecture and surveying
• scaffolding hire (with no labour)
• carpet fitting
• making materials used in construction including plant and machinery
• delivering materials
• work on construction sites that's clearly not construction - for example, running a canteen or site facilities

•contractors
• subcontractors
• contractors and subcontractors

Under the scheme, the terms 'contractor' and 'subcontractor' have special meanings that cover more than is generally referred to as 'construction'.

Contractor
A contractor is a business or other concern that pays subcontractors for construction work.
Contractors may be construction companies and building firms, but may also be government departments, local authorities and many other businesses that are normally known in the industry as 'clients'.

Think of this as the firm that pays your wages
Some businesses or other concerns are counted as contractors if they have spent more than £3 million on construction within the previous 12 month period. The rules require a business to monitor construction spend regularly.
Private householders are not counted as contractors so are not covered by the scheme.

Subcontractor
A subcontractor is a business that carries out construction work for a contractor.
Think of this a you - the worker - the person that does the work and gets paid with a 20% CIS deduction. Remember you are Self-Employed.

Businesses that are contractors and subcontractors
Many businesses pay other businesses for construction work, but are themselves paid by other businesses too. When they're working as a contractor, they must follow the rules for contractors and when they're working as a subcontractor, they must follow the rules for subcontractors.
Think of it this way, the firm that pays you may be working for a bigger firm who has given your firm the work.

This depends on your:
Earnings Expenses
Other income if you have any
Personal Allowance
Tax Credits
Whether or not you owe HMRC money from the past

Travel Expenses
Subsistence Costs
Tools and Equipment
Office Expenses
Legal and Financial Costs
Training and Development Expenses
Marketing and Advertising
Insurance
Subcontractor Payments
Depreciation and Asset Write-Offs

A Unique Taxpayer Reference (UTR) is simply a 10-digit number, for example 12345 67890, provided by HMRC when someone registers for self assessment for the first time. It might just be called a 'tax reference. This is usually only needed if you are self employed.

• A Unique Taxpayer Reference (UTR) is simply a 10-digit number, for example 12345 67890, provided by HMRC when someone registers for self assessment for the first time. It might just be called a 'tax reference'.
• Self-employed individuals pay their tax and National Insurance contributions through the self assessment system so should have a UTR. However, so do many other individuals, who are not self-employed. For example, those with rental properties, investments or foreign pensions may pay tax through the self assessment system and also have a UTR.
• It is possible to get a UTR even if you don't really have a reason to be in the self assessment system!
• You apply for a UTR by filling in a short form online. Which form you complete, depends on the reason you are applying - for self-employment, or another reason. Getting a UTR as a self-employed person does not mean HMRC have checked the person meets the self-employment criteria. It is therefore not a confirmation that someone is genuinely self-employed.
• It is also important to understand that just because someone has a UTR because they are self-employed in one job doesn't necessarily mean they will be self-employed in another job. The same goes if they have a UTR because they have been self-employed in a previous job - it doesn't mean they will be self-employed now.
• Having a UTR does not mean that someone is actually compliant with their tax obligations and has filed their tax returns (accurately and/or on time) or paid their taxes. We know that some engagers might require proof of compliance and taxes paid in certain sectors or for positions of responsibility, trust and credibility. Having a UTR does not provide this proof.

Well technically, there is no longer any such thing as a CIS number - it was abolished as part of the CIS reforms of 2007. But in practice your UTR is the first ten digits of your old CIS card number.