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:
- The current payment must be the standard rate of deduction if a subcontractor was last paid at the standard rate.
- The current payment must be gross if the previous payment was gross (if a deduction was not required).
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.
CIS Subcontractor Deduction Rates
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:
- Is not registered for Construction Industry Scheme (CIS).
- Cannot get verified by the contractor (read more about verifying CIS subcontractors).
- Gives false or incorrect information about the name of their business or its legal status.
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
CIS Gross Payment Status
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.
Amounts Not to Deduct from Pay
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:
- Consumable stores (equipment which is now unusable)
- Fuel (except fuel for travelling)
- Manufacturing or prefabrication materials
- Plant hired for the job
ALSO IN THIS SECTION
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.