ECH14610 - Construction Industry Scheme: CIS - From 6 April 2007 - Registering for the Scheme

Contractors and subcontractors register for the Construction Industry Scheme.

A contractor must register for the Construction Industry Scheme when they first engage subcontractors. The contractor will then be given a Contractor Scheme Reference and will be issued with monthly returns (CIS300). Larger contractors who operate from more than one site can have more than one scheme so that returns go to the correct address.

A subcontractor must register for the Scheme if they wish to receive payments without any deductions (gross payment) or following a deduction of a standard amount (20%) on account of tax (payment under deduction). Subcontractors who do not register will receive payments after a deduction of a higher amount (30%) on account of tax (higher rate).

To successfully register for payment under deduction or gross payment a subcontractor must be able to provide HMRC with evidence of their identity. In some circumstances HMRC will call the subcontractor into an HMRC office to carry out an identity check (CISR42140)

To successfully register for gross payment the subcontractor must also satisfy three tests.

The business test

That the subcontractor is

• carrying on a business in the United Kingdom and
• the business consists of or includes construction work and
• the business has a bank account

Although the business must have a bank account it does not have to be a UK bank account. If the CIO has reason to doubt that the business has a bank account the CIO should

• take note of the way in which the subcontractor’s business manages it’s finances, for example how are subcontractors paid?
• question the subcontractor carefully to explore any problems and
• consider cancellation of gross payment registration if the business does not satisfy the bank account requirement of the business test ( ECH14650).

The turnover test

That the subcontractor has a turnover of at least the minimum amount laid down in the legislation.

The minimum amount is

• for an individual - £30,000 and
• for each partner in a partnership or ‘relevant person’ in a company - £30,000.

An alternative test can be used for partnerships or companies. The minimum amount is

• £200,000.

The compliance test

That the subcontractor has complied with all of their obligations under the Taxes Acts.

More information on the registration process can be found in the Construction Industry Scheme (Reform) Manual at CISR42000.