CIS Payroll Outsourcing for Construction Companies

CIS Payroll Outsourcing for Construction Companies

Everyone who is part of the construction company is now familiar with the CIS or the Construction Industry Scheme. Introduced in 1972, the CIS has evolved from a way to regulate overseas workers enjoying a tax-free wage to a well-defined process that ensures that everyone pays just pays the right amount of tax.

Who is Covered by the CIS?

HMRC or Her Majesty’s Revenue and Customs has defined construction in a way to include various activities in addition to the basics like building, ground works, roofing, and plastering. The other activities it includes are:

  • Erecting scaffolding and dismantling it
  • Demolition
  • Electrical works
  • Plumbing
  • Landscaping
  • Decorating and painting
  • Maintenance, repairs, and extensions

CIS also includes planting trees as a construction activity if it is being done as part of a building project.

If you work as a contractor and hire workers to take part in any of the above activities, you need to register yourself as a contractor and comply with the rules stated under CIS. Subcontractors do not necessarily have to register with the CIS, but not doing so will lead to a whopping 30% tax deduction instead of 20%.

Also, if you work both as a contractor and subcontractor depending on the type and scale of the construction project, you are required to register as both with the CIS.

CIS Compliance

Similar to the functioning of PAYE, tax is deducted at the point where the payments are being made to the sub-contractors, i.e., at the contractors’ end. There are several tasks that need to be completed for CIS compliance:

  • Checking whether the sub-contractor is genuine
  • Checking if the sub-contractor is registered with the CIS
  • Make the required tax deductions and transfer the amount t HMRC
  • If a sub-contractor opts out of CIS and wants to pay a higher tax rate, the payroll should specify it correctly
  • Keep records of the monthly returns
  • Processing payments to the sub-contractors on time.

Why CIS Payroll Outsourcing?

Outsourcing is done for tasks that are not your area of expertise. As a construction company or a contractor, you are not the one adept at managing the CIS payrolls. By outsourcing, you take a step away from the duties that you do not excel at. But there are more benefits that CIS payroll outsourcing can give you:

  • You get a dedicated team of experts, something you cannot have in-house without spending a fortune.
  • You cut the cost of employees processing payroll in house
  • By outsourcing the CIS payroll services, any mistakes that happen will be the payroll provider’s responsibility, not yours
  • Payment deadlines will always be met
  • You can put as many subcontractors on outsourced payroll as you want
  • Your payroll provider is always up to date with the CIS legislation changes, reducing any chance of negligence on your part

If you are a small contractor with a handful of sub-contractors, you can easily manage the CIS payrolls on your own. But as you grow, and your team expands outsourcing the CIS payroll is the most efficient and cost-effective decision for your business.

David Lockhart