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The rules of the Construction Industry Scheme (CIS) cover payments made by contractors to subcontractors for construction work they do.
The scheme covers all 'construction operations' - almost all types of construction work - done in the UK. It makes no difference where the contractor and the subcontractor are resident - CIS still applies whether they're resident in the UK or not.
This guide will help you if your business is a contractor or subcontractor that isn't resident in the UK but does construction work covered by the scheme. It explains what you'll need to do before you start working, and outlines the steps you'll need to take to claim a repayment if you're exempt from UK tax.
The guide will also help you if you represent a non UK-resident business that does construction work in the UK. But it won't be relevant if you're a self-employed individual who's come to the UK to work in the construction industry.
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CIS can apply to any business that does construction work in the UK - or in UK territorial waters - whether it's resident in the UK or not. So no matter where your business is based, the scheme will apply if you're:
It doesn't matter where the payment is made, either - it's just down to where the work was done and whether it was the type of work that's covered by the scheme.
UK territorial waters means the sea around the UK as far out as the 12 mile offshore limit. Construction work in UK territorial waters covered by CIS could include building or maintaining an oil platform, for example.
HM Revenue & Customs (HMRC) treat non-resident contractors and subcontractors in the same way as they treat UK contractors and subcontractors. This means that contractors will have to:
Subcontractors will have to:
You can read an overview of CIS and how it works in HMRC's booklet CIS340 'Construction Industry Scheme - guide for contractors and subcontractors'.
Non UK-resident businesses that pay subcontractors for construction work in the UK, and non-resident businesses that intend to work as subcontractors in the UK, need to contact the HMRC Charity, Assets and Residence (CAR) - CIS team. This includes businesses in the Republic of Ireland (Eire) that don't have a UK base and aren't liable for Corporation Tax in the UK.
If you intend to work in the UK as a construction industry contractor you'll need to register before you take on your first subcontractor. It makes no difference whether you're likely to pay them gross or after making a deduction.
There are three ways of contacting HMRC's CAR CIS team to register with the UK CIS. You can contact them by:
The postal address for the HMRC CAR CIS team is:
Personal Tax International
St Johns House
You can contact HMRC's CAR CIS team on Tel 0151 472 6273. If calling from abroad Tel + 44 151 472 6273 to:
You can also contact HMRC by fax on 0151 472 6148.
If you intend to work in the UK as a subcontractor in the construction industry you will need to register with HMRC before you actually start working.
If you don't, contractors will have to make a deduction at the higher rate - 30 per cent - from your pay before you get it.
If your business is resident in a country that has a double taxation agreement with the UK, you might be able to claim exemption from UK tax.
Even if your business is exempt from UK tax under a double taxation agreement, it'll still have to follow the rules of CIS and operate the scheme in the normal way.
'Double taxation' happens when income gets taxed in two countries - the one where a business or person is resident and the one where they earn the income. A double taxation agreement is an agreement between two countries to reduce the amount of tax that's actually paid. The aim is to make sure the taxpayer only pays the same, or close to the same, amount of tax as they would have paid if they'd earned the income at home.
You can read more about double taxation relief in the International section of the HMRC website.
If you're a subcontractor and the country your business is resident in has a double taxation agreement with the UK, then it may be possible to claim back some of the deductions that contractors have made from your pay.
You'll be able to make a claim if the profits your business makes from construction work in the UK aren't earned through a permanent UK establishment that you're using to carry on your business. HMRC's definition of a permanent establishment would include:
A building site or construction project counts as a permanent establishment too if it lasts for longer than a certain period. This period is specified in the terms of the double taxation agreement and is generally between 3 and 24 months - you'll need to check.
You'll find a list of double taxation agreements between the UK and other countries in HMRC's booklet HMRC6 'Residence, Domicile and the Remittance Basis'.
To claim exemption from UK tax under a double taxation agreement, contact the HMRC CAR CIS team at:
Personal Tax international
St John's House
If HMRC agree your business is exempt from UK tax, they'll repay your deductions.
If your business is a company, first set off any deductions that contractors have made from your pay against:
If there's anything still outstanding once you've done this HMRC will repay it when your company makes its annual return on form P35.
If your business isn't a company you can claim a refund by contacting the HMRC Office where you're registered for CIS.
If there's no double taxation agreement with the country where your business is resident then it won't be exempt from UK tax. But the deductions that contractors have made from your pay are normally allowable against your tax bill in the UK. This means HMRC will reduce your tax bill for the year by the amount that's already been paid over to them in deductions.
It's possible that you could make little or no profit during the tax year. If this happens, you can claim a repayment from HMRC. If HMRC agree, they'll pay you back the difference between what you've paid and what - if anything - you owe in tax.
If your business is a limited company, you'll need to claim your repayment when you send HMRC your annual return on form P35.