Check out the procedures for subcontractors to get paid under the Construction Industry Scheme (CIS). Find out how deduction rates work and what does not count as your pay.
GET PAID: There are several reasons why a contractor would not need to verify a subcontractor. In this case, they must pay subcontractors on the same basis as the previous payment paid to them.
An exception may apply if HMRC instruct otherwise. But, in simple terms, this part of the subcontractor payment process means:
There are several important CIS subcontractor obligations to follow to be sure of getting the correct payment from a contractor.
One of the most important is making sure you give the correct legal business name or trading name. It must be the same one you gave when you registered for the Construction Industry Scheme (CIS).
Note: Failing to give the registered legal business name can affect the amount you get paid as a subcontractor.
As a rule, a contractor will make the standard rate deduction of 20% before paying a subcontractor under CIS.
But, HM Revenue and Customs (HMRC) instruct CIS contractors to make deductions at the higher rate of 30% if a subcontractor:
The person you are contracting for should provide you with monthly statements of payments and deductions (see below). You can use them to work out whether you still owe any tax and National Insurance to HMRC or whether you are due a refund.
If you are subcontracting you can apply for gross payment status at the same time as you register for CIS. Doing so means the contractor would not make deductions from your pay. It also means you would pay all your tax and National Insurance at the end of the tax year.
Some items and purchases do not count as your pay. Thus, a contractor should not make deductions for certain things charged on your invoice, including:
Register as CIS Subcontractor | Details on the process for setting up and registering as subcontractors.
Pay Tax and Claim Deductions | Responsibilities for paying tax and National Insurance for the business.
Getting Paid as a Subcontractor Under CIS Scheme in United Kingdom