The Construction Industry Scheme (CIS) is a HMRC scheme that regulates tax receipts by forcing deductions at source. Sole traders can register for CIS if they’re providing services to a contractor (in this context, a ‘contractor’ refers to a construction company).
The guidance says that the scheme applies to workers who are self-employed under the terms of their contract and construction companies must assess employment status of the subcontractor when they first engage them.
Many in the construction industry have misinterpreted the scheme’s guidance that fulfilling their CIS obligations will also fulfil their responsibilities when it comes to employment status.
CIS registration does not mean that a worker is self-employed for tax purposes. No material investigation into employment status is taken as part of the CIS registration process and so can’t be a definitive indicator.
Construction companies engaging subcontractors can retain a potentially significant liability if not assessed correctly. As construction makes up the largest single population of self-employed workers, it’s likely that the industry may well become one of HMRC’s biggest targets.
Find out more about CIS and employment status.