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CIS Payroll FAQs

What is CIS payroll?

CIS payroll (at least as far as we are concerned) is an overarching phrase that describes payments that you make to self-employed sub-contractors within HMRC’s Construction Industry Scheme, and these are usually day-rate sole traders.

Why do you need EEBS?

It’s no secret that for many years conflict has existed between the UK tax authorities and the construction industry over the employment status of sub-contractors.
This is because we have up to seven times more people in self-employment in the construction industry compared to any other sector of the economy (except the performing arts), and HMRC ignores the historic and practical reasons for our reliance on self-employment and take the view that the difference is simply “disguised employment” rather than a genuine choice for both individuals and contractors and view this as just a ruse for avoiding employers national insurance contributions.

Why is there such a reliance on self-employment in the construction industry?

Three reasons:

  1. Historic Model – if you are a small or medium contractor you may only need the specific skills of particular tradesperson for a relatively short period of time – so the modern way of working has more than a passing resemblance to the historic transitory nature of an artisan tradesperson way of working where an individual goes from site to site, depending on who has work available, and
  2. Simplicity – it allows small and medium contractors to avoid much of the complexity associated with employing people, especially if they are only needed for short term engagements, thus allowing contractors to more easily align workforces to workload, and
  3. Costs – there are cost benefits for both the contractor and the sub-contractor – the cost of engaging a self-employed worker is up to 40% lower than that associated with employment, so the contractor can reduce costs whilst paying more to the self-employed worker, who in turn has far greater control over when and where he works.

How does EEBS protect my business from HMRC and Employment Rights claims?

We create an unbreachable legal firewall between yourself and the sub-contractors that prevents the HMRC from re-classify the individuals as your employees, as allows you to match workforce to workload.

What is an Employment Status Review?

When referring to an Employment Status Review we mean the element of a tax inspection that focuses on how you consider the employment status of any self-employed sub-contractors that you engage. This is usually within the context of a more general review of your compliance with your tax obligations – CIS reporting, PAYE, Director renumeration, etc…

How does the HMRC decide if my sub-contractors should be employees?

HMRC take a fairly simplistic view, and if:

  • You use self-employed sub-contractors on a regular basis without a written contract,
  • You supply the majority of the, plant, equipment and materials,
  • You pay them a day or fixed rate
  • The sub-contractor cannot demonstrate that they can make a loss as well as a profit, or that they have an active portfolio of other clients

then HMRC are extremely likely to reclassify these sub-contractors as your employees, rather than find them genuinely self-employed, making you liable for any unpaid tax and National Insurance contributions, plus penalties.

What will it cost me if I am forced to convert my sub-contractors to employees?

You would likely face a bill for the unpaid employer’s National Insurance contributions that HMRC would calculate you owe – plus late penalty fees and interest. In addition, HMRC would expect you to employ all of your sub-contractors going forward: It is generally reckoned that the additional payroll burden for employing as opposed to sub-contracting is an increase in payroll costs of up to 40%. This comes from, amongst other things:

  • Employer’s National insurance costs
  • Holiday pay
  • Additional costs for PAYE and the administration of Employment Rights legislation
  • New pension contributions which continue to rise
  • Employee benefits and leave entitlements.

This estimate does NOT include any additional cost incurred through the reduced ability to vary your workforce to match your workload, and the enhanced earnings expectations of the previously self-employed sub-contractors.

What are the two strands of employment law?

Employment issues can be considered by two separate divisions of the courts, at their lower two levels – the employment tribunal service considers employment rights issues, and the first and second tier Tax tribunals consider conflicts with the HMRC.

How many HMRC inspections has EEBS experienced?

Throughout our business life we have experienced more than 50 HMRC client status inspections, and to date HMRC have never challenged the arrangements that we have in place.


What happens if I have an HMRC inspection or I’m taken to an employment tribunal whilst working with EEBS?

If you experience a HMRC inspection or if one of the sub-contractors that we supply takes you to an employment tribunal whilst using our services, we will provide you with as much or as little support as you might need, up tofull legal representation. In our 20 plus years of business, we’ve been to employment tribunals a dozen times and have never lost a case. If things were to change and we did lose a case then we would pay all of the costs associated with the claim.


Do EEBS provide a guarantee?

Yes – If, after a status investigation HMRC were to challenge our arrangements, or if a sub-contractor were to take you to an employment tribunal whilst being supplied by us, we will manage the entire process for you, with full legal support. If we were to lose the case (and to date we have never lost a case) we would pay all the associated costs

Does EEBS work in any other industries?

No – we work exclusively for the construction industry, and specialise in compliant solutions specifically for the industry.

What is IR35? Can EEBS protect my business from IR35?

IR35 is a piece of tax legislation that only targets individuals who have their own limited companies. It’s been high profile lately because some recent changes have moved the potential tax liability from the individual, to the client. But don’t worry – working with EEBS will completely eliminate the problem for you, making it our issue not yours!!

What are the costs of using EEBS?

Our margin is calculated as either a percentage or fixed fee per sub-contractor engaged, per week paid. We aim to earn between £6 and £16 a week per sub-contractor, depending on the numbers engaged.

Are there any other Fees?

No. There are no set up fees for clients or sub-contractors, nor tie-in periods. In effect we provide “pay as you use” service. No notice is required to terminate our agreement.

How do I pay EEBS?

By Chaps or Bacs, with cleared funds on the Wednesday of the week payment is due.

Does the VAT Reverse Change Scheme apply to EEBS?

Yes, after consultation with our Tax Advisors and directly with HMRC, EEBS apply the VAT Domestic Reverse Charge Scheme to services that we supply to our clients. This is because we “buy in”, and subsequently “sell on” a sub-contractors construction services rather than just their labour only.

What’s the process from start to finish?

EEBS provide you with a bespoke online portal for uploading sub-contractor payments. We take full responsibility for the employment status of these sub-contractors and liaise with HMRC for the reporting of the payments made. This greatly reduces your monthly CIS burden as you only report the monthly payments to EEBS as well as preventing HMRC reclassifying your sub-contractors as employees whilst reducing the risk of employment rights claims.
In addition, EEBS will:

  • Verify each sub-contractor with HMRC
  • Calculate and pay each sub-contractor in line with your current agreements
  • Text each sub-contractor the amount they are going to be paid
  • Provide both a payment statement (for each time the sub-contractor is paid) and an annual CIS deduction statement
  • Provide limited public liability insurance, if required.

EEBS Weekly Payment Process:
Please note that EEBS can make payments on a weekly, bi-weekly or monthly basis.

  1. Monday – The online portal is open for payment submission
  2. Tuesday – payments are submitted to us online by 4pm
  3. Wednesday – EEBS payroll team make any final amendments or adjustments until 4pm. After 4pm all clients are invoiced and sub-contractors received their text message detailing the amount they will be paid.
  4. Friday – sub-contractors receive payment.

How quickly can I set up with EEBS?

We can set you up within a day!

What about public liability insurance?

Under EEBS Contract of Services it has always been a requirement that sub-contractors insure themselves with Public Liability Insurance.

Option 1) Labour only sub-contractors may already be covered by a contingent element of your own employer’s liability insurance. If you wish to continue this arrangement, we ask you to sign a declaration to this effect.

Option 2) The sub-contractor must obtain their own policy through the insurance market, and provide EEBS with a copy of your policy, or

Option 3) If proof of the above is not submitted then they will be covered by EEBS contingent Public Liability Insurance that covers EEBS own position, should legal liability exposure that could fall on EEBS Ltd arising from the negligence of a sub-contractor, the sub-contractor will be covered by EEBS policy. The weekly fee for this cover is around £4 and charged to the sub-contractor.

How do the sub-contractors benefit from being paid by EEBS?

  • They have to be registered for CIS and have a UTR number
  • Their CIS is deducted and paid over to the HMRC in real time
  • They receive a text, and a payslip by email, and yearly statements
  • We can complete their annual tax return for £99+vat

How do the sub-contractors benefit from being paid by EEBS?

  • They have to be registered for CIS and have a UTR number
  • Their CIS is deducted and paid over to the HMRC in real time
  • They receive a text, and a payslip by email, and yearly statements
  • We can complete their annual tax return for £99+vat

What is EEBS' status?

EEBS is a gross payment sub-contract intermediary.

What is a Gross Payment Status?

CIS Gross Payment Status means contractors will pay you in full – in other words without deducting 20%. You pay all your tax and National Insurance at the end of the tax year.

How do I get Gross Payment Status?

You must pass some HMRC tests. You’ll need to show that:

  • you’ve paid your tax and National Insurance on time in the past
  • your business does construction work (or provides labour for it) in the UK
  • your business is run through a bank account

You must also be able to pass the “turnover test” for the last 12 months. (Not including VAT and materials) your turnover must be at least:

  • £30,000 if you’re a sole trader
  • £30,000 for each partner in a partnership, or at least £100,000 for the whole partnership
  • £30,000 for each director of a company, or at least £100,000 for the whole company

If your company is controlled by 5 people or fewer, you must have an annual turnover of £30,000 for each of them.

How do I lose Gross Payment Status?

HMRC conduct regular reviews of Gross Payment Status contractors at least once in every 12-month period. You will automatically lose gross payment status if:

  • any CIS300 returns have been late on four or more occasions;
  • any one contractor return is over 28 days late;
  • any PAYE or CIS payments have been late on four or more occasions;
  • any one PAYE or CIS payment is more than 14 days late;
  • any self-assessment payment is more than 28 days late;
  • any Corporation Tax payment is more than 28 days late, or is outstanding at the date of the review;
  • a P35 is still outstanding at the time of the review;
  • any self-assessment return (income tax or Corporation Tax is outstanding at the time of the review; or
  • any payment of £100 or more due to HMRC is outstanding at the time of the review.

There is a 90-day notice period that must be given by HMRC before Gross Payment Status is revoked and of course you have the right of appeal against the decision. You have 30 days from the date of the letter within which to appeal. You must be able to demonstrate a “reasonable excuse” to establish a successful appeal.

How do I get Gross Payment status back if I lose it?

If you do not appeal (and you must be able to demonstrate a “reasonable excuse” for the failure that led to the revocation of Gross Payment Status) you must wait one year before you can re-apply.

What is the Construction Industry Scheme (CIS)?

The construction industry holds the dubious honour of being the only sector of industry to have its own tax regime – the Construction Industry Scheme, or CIS as it is commonly known. The CIS exists for one simple reason – HMRC believe the industry is a constant source of lost or unpaid taxation, and the regulations exist to force the industry to honour its tax obligations.

Why must I register with the CIS?

The law requires all construction industry contractors to register with the scheme. Contractors must verify the legitimacy of any sub-contractors that they aim to pay for construction services with HMRC before they pay them, and to report all payments made to sub-contractors to the HMRC on a monthly basis. It also requires the contractor to make deductions of up to 30% from the sub-contractor, and to pay this deduction to HMRC on behalf of the sub-contractor – a payment “on account” of his annual self-employed tax bill. Contractors are also required to keep detailed records, and provide sub-contractors with a deduction statement. If sub-contractors do not register with the scheme, they will automatically suffer deductions at the higher 30% rate.

Who must register with the CIS?

All contractors who work within defined sectors of the construction industry must, by law register with the CIS. Although it is not obligatory for individuals who wish to work on a self-employed basis within the construction industry to register under the CIS, if you do not register the deductions your contractor is obliged to take from you will be 30% of your earnings, rather than the standard rate of 20%. All sub-contractors are entitled to a payment deduction statement from their contractor on a monthly basis, and must complete an annual self-assessment for tax.

Is CIS the same as PAYE?

No, CIS is the Construction Industry Scheme, a specific tax regime that only applies to the construction industry. PAYE refers to “pay as you earn” where tax and National Insurance contributions are deducted from individuals at source. This applies to payments made to all individuals who are engaged under employment contracts, and occasionally to self-employed arrangements.

How does the CIS scheme work?

The Construction Industry Scheme or CIS is a mandatory tax regime under which almost all construction companies must operate. Under the Scheme contractors deduct money from the payments they make to sub-contractors, and pass it on directly to HMRC and Customs. These deductions count as advance payments towards the sub-contractors’ tax and National Insurance contributions.

All contractors must register for the scheme; Sub-contractors don’t have to register, but deductions are taken from their payments at a higher rate if they do not. A sub-contractor must pass certain tests if they wish to be paid without deduction. The standard rate of deduction is 20%, and 30% deductions are applied to sub-contractors who are not known to the HMRC. All sub-contractors must be “verified” with HMRC by their contractor before they are paid.

How do CIS sub-contractors get paid?

Under normal arrangements and unless a sub-contractor has a self-billing arrangement process, he will supply an invoice to his contractor once the works for which they have been engaged have been completed to the required standard. They will then be paid in accordance with the terms of his contract, and if a specific job takes a number of weeks the payment might be under a “draw-down” arrangement. They might also be paid under a “day rate” arrangement where the sub-contractor is paid in arrears, which is generally weekly, but might also be fortnightly or monthly.

How does a CIS sub-contractor get paid through EEBS?

If paid through EEBS the completion of a payment schedule by the client is deemed to be confirmation that the engagement for which the sub-contractor has been tasked has been completed to the required standard, and the sub-contractor can be paid by EEBS. Again, this might be either job specific, or on a day rate.

How does a CIS sub-contractor get paid through EEBS?

If paid through EEBS the completion of a payment schedule by the client is deemed to be confirmation that the engagement for which the sub-contractor has been tasked has been completed to the required standard, and the sub-contractor can be paid by EEBS. Again, this might be either job specific, or on a day rate.

What’s the difference between CIS and self-employed?

There’s no difference – a self-employed worker in the construction industry must, in most cases be paid through the CIS, or construction industry scheme.

Is the employer a contractor under CIS?

Yes – if working within the industry sectors established by the construction industry scheme.

What is exempt from CIS?

There are only a limited number of exemptions to the CIS, and these include the professional work of engineers, draughtsmen, scientists and technicians, architects and surveyors, plus consultants in building, engineering, landscaping and interior or exterior design, plus the manufacture or delivery of materials to site, or the transport of spoil away from site.

The CIS does also not apply if your work is:

paid for by a charity or trust, or paid for by the governing body or head teacher of a maintained school on behalf of the local education authority, or on the subcontractor’s own property and is worth less than £1,000 excluding materials – but you must call the CIS helpline to get an exemption for that.

The following list is taken directly from HMRC’s guide to operations that are exempt from the CIS:

  • manufacture or offsite fabrication of components or equipment, materials, plant or machinery and delivery of these to the site – for example:
    • traditional building materials
    • prefabricated beams and panels
    • ready-mixed concrete
  • manufacture and delivery of prefabricated site facilities
  • running of site facilities such as canteens, hostels, offices, toilets and medical centres or the supply of security guards
  • installation or replacement of telecommunication or computer wiring through pre-existing ducting in buildings
  • delivery of road-making materials
  • setting out traffic cones
  • hire of scaffolding equipment (without labour)
  • delivery, repair or maintenance of construction plant or hire equipment without an operator – for example, concrete mixers, pumps and skips
  • installation of fire alarms, security systems, including burglar alarms, closed-circuit television as part of a security system, and public address systems, but not any preparatory works on the land such as digging, building/erecting concrete posts on which to install the CCTV
  • transport of materials from site to site on the public highway
  • assembly of temporary stages and exhibition stands including lighting
  • external cleaning (other than painting or decorating) of buildings and structures
  • drilling for, or extraction of, oil or natural gas
  • extraction of minerals, boring or construction of underground works for this purpose
  • manufacture, delivery, repair, servicing or maintenance of these items:
    • systems of heating
    • lighting
    • air-conditioning
    • ventilation
    • power supply and distribution
    • drainage
    • sanitation
    • water supply and distribution
    • fire protection works
    • lifts, plant or machinery needed by the specification of a building under construction or alteration
  • replacement of system parts not involving other construction operations (for example, taps or a radiator)
  • stairlifts requiring no alteration or repair to the building
  • tree planting and felling in the ordinary course of forestry or estate management
  • manufacture and delivery of lamp standards – routine maintenance such as cleaning and general replacement
  • manufacture offsite and delivery of flooring materials
  • manufacture and delivery of:
    • glazing materials
    • computer and instrumentation systems
    • thermal insulation materials
    • heating and ventilation systems
    • doors and rolling grills
    • painting or decorating materials
  • manufacture, delivery and installation of seating, blinds and louvered shutters
  • manufacture, installation and repair of artistic works (for example sculptures and murals) which are wholly decorative in nature (not functional items caught by the scheme which incidentally have artistic merit)
  • manufacture and installation of solar, blackout or anti-shatter film
  • signwriting and erecting, installation and repair of signboards and advertisements
  • carpet fitting.

What falls under the CIS scheme?

Generally speaking, all construction operations to either a building or the land falls within the scope of the scheme – with a very few exceptions or anomalies.

The following list is taken directly from HMRC’s guide to operations that fall within the CIS:

  • demolition of, for example, buildings, structures and tree-felling
  • preparation of site and site-clearance, earth-moving on site, excavation, tunnelling and boring
  • preparation and laying of foundations and piling
  • actual construction, alteration or repair of a permanent or temporary building or civil, chemical or other industrial engineering work or industrial plant or structure – for example:
    • asbestos removal
    • storage tanks
    • silos
    • pylons
    • cranes or derricks
    • pumps
  • construction of site facilities including site huts, portable buildings and site hoardings
  • installation of power lines, pipelines, gas mains, sewers, drainage, cable television and telecommunications distribution systems
  • installation of closed-circuit television for purposes other than security (such as traffic management)
  • installation of public services
  • construction, repair and resurfacing of roads and bridges including white-lining
  • provision of temporary and permanent roadways and other access works such as drives
  • erection or dismantling of scaffolding falsework and formwork
  • plant hire with operator for use on site
  • installation of fire protection systems designed specifically to protect the fabric of the building (such as sprinkler systems, fireproof cladding) rather than a fire warning (alarm) system
  • installation of prefabricated components or equipment under ‘supply and fix’ arrangements.
  • transport of materials on site
  • internal cleaning of buildings and structures carried out in the course of, or on completion of, their construction, alteration, extension, repair or restoration
  • work done on installations (such as rigs, pipelines, construction platforms) maintained or intended to be established for underwater exploration for, or exploitation of, minerals where the work is on land or in the UK territorial waters (up to the 12-mile limit)
  • installation of systems of heating, lighting, air-conditioning, ventilation, power supply and distribution, drainage, sanitation, water supply and distribution, and fire protection works
  • installation of lifts, plant, or machinery needed by the specification of a building under construction or alteration
  • construction and repair of industrial plant
  • site restoration and landscaping
  • installation, structural repair and painting of lamp standards, traffic lights, parking meters and street furniture
  • construction of concrete and marble floors
  • installation of and repair to:
  • glazing
  • doors and rolling grills or security shutters
  • kitchens and bathrooms
  • shop-fittings including fixed furniture (except seating and freestanding display cabinets)
  • painting and decorating the internal or external surfaces of any building or structure

Does a sole trader pay CIS?

Payments to a sole trader (assuming we are talking about a self-employed construction worker within the UK) will be subject to CIS deduction if he is paid by a business that is obliged to operate within the CIS. He will not, for instance, be subject to CIS deductions if he works for an end client whose main business is not construction.

Does a sole trader pay CIS?

Payments to a sole trader (assuming we are talking about a self-employed construction worker within the UK) will be subject to CIS deduction if he is paid by a business that is obliged to operate within the CIS. He will not, for instance, be subject to CIS deductions if he works for an end client whose main business is not construction.

Is CIS compulsory?

Yes, it’s compulsory for all contractors who work within the parameters that are defined by the scheme to register, but Sub-contractors don’t have to register. If they are not known to the HMRC their deductions are made at a higher rate which is 30% rather than the standard 20%.

Is CIS number same as UTR?

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.

What if a sub-contractor is not registered for CIS?

Sub-contractors are not required to register by law, but if they are not registered their contractor is obliged to take payments from them at a higher rate. The standard rate of deduction is 20%, but it’s 30% if you are not known to the HMRC.

How is CIS payroll calculated?

From our perspective it depends on the CIS status of the sub-contractor, if he is VAT registered and if we are providing public liability insurance cover, but generally speaking he receives 80% of his gross pay plus the full cost of any materials that he may have supplied.

Do Limited companies pay CIS?

Yes – assuming they are working within the parameters established by the CIS! The rules apply to all working entities – limited companies, partnership or sole traders. The only exemptions are charities, charitable trusts and the governing bodies or head teachers of maintained schools.

Ready to contact our team?

Our team is happy to answer your CIS Payroll questions. Fill out the form and we’ll be in touch as soon as possible.

Need to talk to EEBS straight away about CIS Payroll?

01245 493832

07719 065177

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