When taking on an individual for any type of construction work, employers should carefully consider the individual’s employment status by using the CIS verification process prior to work. This is because their status will have an effect on the legal categorisation of their tax payment.
If an individual says that they will pay their own tax, employers should advise them that deductions will only be avoided if they have gross payment status. The HMRC will confirm upon verification which rate of deduction should be applied.
The scheme covers all construction work carried out in the United Kingdom including jobs such as:
- site preparation
The scheme covers all types of businesses and other concerns that work in the construction industry, including companies; partnerships and self-employed individuals.
For the purpose of the regulations, an individual completing work of this nature needs to either be an employee or a sub-contractor. If the worker is not an employee, he will be a sub-contractor and both parties need to be registered with the HMRC prior to any work taking place. The contractor should verify that the sub-contractor is registered which can be done via https://www.gov.uk/what-you-must-do-as-a-cis-contractor/verify-subcontractors
by entering the sub-contractors Unique Taxpayer Reference (UTR) number.
If successfully verified, CIS deductions should be taken at the 20% rate. If not successful, deductions should be taken at the 30% rate.
If you need any clarification on this issue then contact the Peninsula Advice Service on 0844 892 2772.