Today we are going to answer some of the public’s most searched questions around CIS payroll. So Nick, here are your starters for 10! Starting simply, what is CIS payroll?
CIS payroll generally refers to a payroll company or a contracting intermediary business that specialises in the Construction Industry Scheme (CIS) and manages the CIS reporting or tax arrangements for both the sub-contractor and the contractor.
Does a limited company need to be CIS registered?
If it works in the construction industry, then yes, it does.
Do contractors get paid for holidays?
A genuinely self-employed individual who works on a self-employed basis does not get paid for holidays. An employee is entitled obviously to receive holiday pay – as is a worker who has an intermediary class of employment (halfway between the genuinely self-employed and an employee).
So, an employee gets holiday pay; a worker who is subject to the supervision, direction and control in how he operates – and is part and part of the organisation for whom they are working – is also entitled to holiday pay, but a genuinely self-employed subcontractor does not.
How do I register for CIS as a contractor?
You can register for CIS as a contractor through the HMRC Government Gateway account. You go into your own account there and there is a route which you have to follow. You can also take advice from the CIS helpline, which is 0300 200 3210.
CIS vs PAYE – what’s the difference?
One presumes that we are concerned about the difference in payment methods. Both are methods of treatment of earnings for tax purposes. So they are both methods of Taxation. PAYE applies to all employees, so anyone who is an employee must be taxed through the PAYE system. Occasionally some workers or self-employed individuals are taxed through PAYE but that’s fairly uncommon.
The Construction Industry Scheme or CIS is a specific tax regime for the self-employed who work in the construction industry. They can be paid one of three ways: they could be paid gross, having applied for – and received – Gross Payment Status; they are paid under deduction, which is the normal method for a self-employed sub-contractor to be paid, and they are deducted 20% of their earnings, if they known to the Revenue, which go towards their tax bill; or if the individual is not known to the tax authorities, they are deducted 30%. Both of those figures – 20% or 30% – are set against their tax burden for the year. So that’s the difference; the genuinely self-employed are paid through CIS, and employees and occasional workers are paid through PAYE.
How do I apply for gross payment status?
You have to pass a series of tests through the portal, through your government Gateway account. You then log on to the CIS element and there are a number of tests, which you have to pass. 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
HMRC will then look at your turnover for the last 12 months. Ignoring VAT and the cost of 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’s controlled by 5 people or fewer, you must have an annual turnover of £30,000 for each of them.
The important thing to note is that you could be fined if you provide false information, and so could anyone who helps you to make a false registration.
