New Construction Industry Scheme (New CIS)

The Construction Industry Scheme sets out the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry and certain other businesses.

Under the Scheme, all payments made from contractors to subcontractors must take account of the subcontractor’s tax status as determined by HM Revenue & Customs. This may require the contractor to make a deduction, which they then pay to us, from that part of the payment that does not represent the cost of materials incurred by the subcontractor.

As of 6 April 2007 a New Construction Industry Scheme started. Its aims are:

to reduce the regulatory burden of the Scheme on construction businesses

to improve the level of compliance by construction businesses with their tax obligations

to help construction businesses to get the employment status of their workers right.

Commencement date

The commencement date for the new Construction Industry Scheme was 6 April 2007. The deduction rates for the new scheme are 20% for subcontractors registered with HMRC for payment under deduction and 30% for those not registered.

Does new CIS use registration cards, tax certificates or vouchers?

No. There are no registration cards, tax certificates or vouchers in new CIS.

Instead, we will give you a unique taxpayer reference number that will identify you on our system. You will need to give this, with your name and National Insurance number (if known), to your contractor(s). Factsheet CIS344, Getting paid by a contractor – advice for subcontractors tells you more about this.

Vouchers are replaced by a monthly return which only contractors need to complete. Factsheet CIS346, The monthly return – advice for contractors tells you more about this.

If you are being paid 'under deduction', your contractor must give you a written or faxed payment statement (which may also be given electronically where you have agreed to this method) showing how much you have been paid and the deductions that have been made from your payments.

Your contractor will give you a payment statement for each tax month or may choose to give you one with each payment where these are more frequent.

Do I need to register for new CIS?

If you were a subcontractor under the previous CIS (before 6 April 2007) then you don't need to register for new CIS if you, or your business, had a

tax certificate CIS5, CIS5(Partner) or CIS6, or

permanent registration card CIS4(P), or

temporary registration card CIS4(T) with an expiry date of 04/2007 or later.

But, if

you are a new subcontractor, and you first start working in the construction industry on a self-employed basis after 5 April 2007, or

you last had a temporary registration card CIS4(T) that expired on or before 03/2007

then you should register for new CIS if you don't want deductions at the higher rate made from your payments.

If you had a tax certificate CIS5 or CIS5(Partner) or CIS6 at the start of new CIS, you will keep gross payment status only where your certificate was due to expire on or after 04/2007. Otherwise, you will only be registered for payment under deduction and a fresh application is needed if you want to be paid gross under new CIS.

How do I register for new CIS?

To register for new CIS you should

phone our CIS Helpline on 0845 366 7899, or

visit www.hmrc.gov.uk/new-cis if you are not registering for gross payment.

If we don't already know about you, that is you have not been paying tax or National Insurance contributions before, we will ask you to come to a local HM Revenue & Customs office for an identity check. Please see page 2 for details.

What are the identity checks?

If we ask you to come to a local HM Revenue & Customs office, you should bring with you at least two original documents showing your identity. Examples of suitable documents (not photocopies) for this purpose include

your birth certificate

any letters you may have from the Department for Work and Pensions (DWP) showing your National Insurance number (NINO)

a utility bill, such as gas, electricity or telephone showing your current address

council tax bills showing your current address

a passport

a driving licence.

I want to be paid gross and not have deductions taken from my payments

To be paid gross by contractors you work for, you need to apply to HM Revenue & Customs and pass the tests set by law that show you are running a proper business. Factsheet CIS343, Applying to be paid gross – advice for subcontractors tells you more about this.

If you cannot pass the tests to be paid gross, we will set you up for payment 'under deduction' at the standard rate of deduction.

Being paid 'under deduction'

After you have registered for new CIS and all checks have been made, if you then want to be paid under deduction, on account of your eventual tax and Class 4 National Insurance bill, you do not need to take any further action.

What if I don't register as a subcontractor?

If you work in the construction industry as a self-employed subcontractor and you are not registered with us, your contractor will be told this when they contact us to check or 'verify' your payment status.

If you are not registered, or you have not given your contractor the right information so that we can match you on our system, then a higher-rate deduction will be made from your payments.

If this happens to you, please contact us to register and to arrange for these higher-rate deductions to be set against your eventual tax and Class 4 National Insurance bill.