The Construction Industry Scheme (CIS) identifies special rules for tax and National Insurance for taxpayers working in the construction industry.

The scheme is a minefield of regulations; meaning it is relatively easy to fall foul of the strict rules in place and even easier to incur penalties.

Does the Construction Industry Scheme apply to me?

Construction Industry SchemeThe scheme applies to all businesses who operate within the construction industry. That includes builders, tradesman, recruitment agencies who supply workmen, property developers and more. It is important that all contractors operate correctly as the penalties for non-compliance can be very expensive.

Businesses in this industry fall into one of two categories: Contractors or Subcontractors.

A contractor is a business or other concern that pays subcontractors for construction work, whereas subcontractors are those businesses that carry out the work on behalf of the contractors. These may be companies, partnerships or sole traders.

CIS investigations can be stressful and lengthy, putting extra strain on your business and personal life.

KinsellaTax will take complete control of your investigation letting you get back to what you do best – running your own life. We battle with HMRC daily on behalf of our clients so we know exactly how to deal with them.

KinsellaTax has Industry specialists with the experience and in-depth knowledge required to tackle and deal with every aspect of your CIS investigation enquiries.

To speak to one of our Construction Industry Scheme specialists call us anytime, day or night, on 0800 471 4546.

 

It is easy to fall foul of the regulations in place for the CIS and, therefore, easy to incur HMRC tax penalties.

You need KinsellaTax to settle any CIS tax investigation.

As shown below, HMRC issue massive tax penalties for those who fail to comply with Construction Industry Scheme rules and regulations.

CIS Penalties

The Construction Industry Scheme tax system is backed up by penalties.

Penalties cover situations such as:-

  • Incorrect monthly returns submitted fraudulently or negligently;
  • Failure to provide CIS records for HMRC to inspect; and
  • Incorrect declarations regarding employment status.

There are two penalties that are more likely to be imposed in a Construction Industry Scheme investigation:

  • Failure to submit monthly return – penalty of £100 per 50 subcontractors per month; and
  • Failure to provide subcontractors with a ‘payslip’ – penalty of £300 plus further penalty of £300 for continuing in this failure.

To avoid tax penalties for failing to comply with HMRC rules, contact KinsellaTax for advice in all CIS matters.

Below is a table showing examples of Construction Industry Scheme penalties for failing to submit monthly returns:-

Number of subcontractors on the return Automatic penalty for a late return (including ‘nil’ returns) Additional penalty for each extra month late (continues up to 12 months) Extra final penalty where a return is over 12 months late
0 – 50 £100 £100 £3,000
51 – 100 £200 £200 £3,000
101 – 150 £300 £300 £3,000
151 – 200 £400 £400 £3,000

The tax penalty will increase, depending on the number of subcontractors on the return.

If there were 500 subcontractors, for example, the late return penalty will be £1,000.

‘Nil’ returns will also be liable for a penalty of £100 per month if it is not submitted or submitted incorrectly or fraudulently.

Can’t sleep at night for worrying about whether you have complied properly with HMRC’s strict Construction Industry Scheme regulations?

Call KinsellaTax’s experts immediately on 0800 471 4546.

Listed below are additional penalties that HMRC may charge in relation to the Construction Industry Scheme follwoing an enquiry:

Offence Penalty
Application for a Certificate – knowingly or recklessly making a false statement or providing a false document Not exceeding £3,000
Failure to notify a change in control of the company Initial penalty of £300 and daily penalties not exceeding £60 per day
Failure to obtain/submit CIS24 vouchers Initial penalty of £300 and daily penalties not exceeding £60 daily
Failure to submit CIS23 vouchers Initial penalty of £300 and daily penalties not exceeding £60 daily
Submission of inaccurate or incomplete CIS23 vouchers Not exceeding £3,000
Unlawful disposal or possession of CIS documents Not exceeding £3,000
Failure to inspect a registration card Not exceeding £3,000
Submission of inaccurate or incomplete CIS25 vouchers Not exceeding £3,000
Failure to surrender a certificate Initial penalty of £300 and daily penalties not exceeding £60 daily
Failure to submit end of year return (first 12 months) Penalty of £100 per month or part month for each batch or part batch of the 50 subcontractors on the return
Failure to submit end of year return (after 12 months) Penalty not exceeding amount payable at 19th April after end of tax year
Incorrect end of year returns Penalty not exceeding the difference between the amount returned and the correct amount
Failure to produce records Initial penalty of £300 and daily penalties not exceeding £60 daily

Non-compliance with CIS rules and regulations has severe implications including strict tax penalties and recovery of tax from contractors.

Give yourself the best chance of winning a Construction Industry Scheme appeal against HMRC by calling 0800 471 4546.

Records

Under Construction Industry Scheme rules and regulations, HMRC requires that contractors maintain full records of subcontractors’ details, payments to subcontractors and whether the subcontractors have been verified.

These records need to be kept for at least 3 years after the end of the tax year to which they relate. HMRC are entitled to inspect these records.

Record Inspection by HMRC

If a contractor receives a request from HMRC to inspect records it is important to seek professional advice before records are inspected under the Construction Industry Scheme.

In a CIS record inspection HMRC will not just be looking to see that the contractor has maintained proper records but they will also look at:-

  • The status of subcontractors to see whether they should be re-classified as employees
  • Whether the correct rate of tax has been deducted from payment. If not, HMRC may seek to recover any under-deduction of tax from the contractor
  • Whether the contractor is operating the CIS correctly. If not, HMRC can seek to hold the contractor liable for any under-deduction of tax.

It is very important to seek professional Construction Industry Scheme advice in this situation.

Take Our CIS Health Check

KinsellaTax staff consists of ex-HM Inspector of Taxes and ex-HM Custom and Excise Officers, fully experienced in HMRC Tax Investigations and Construction Industry  investigations.

For representation and advice on any aspect of the Construction Industry Scheme, call 0800 471 4546to speak to one of our specialists.

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