The Construction Industry Scheme sets out the rules for how payments to subcontractors are made and how they are accounted for and reported by contractors.
A business (limited company, partnership or individual) is a contractor and should register under the scheme if they either:
A business – limited company, partnership or sole trader, that does construction work for a contractor
Contractors must register with the scheme.
Subcontractors don’t need to register with the scheme but the tax deducted from their payments will be higher if they don’t register
Contractors can register with the scheme by:
Subcontractors can register with the scheme by:
Tax is deducted on payments made to subcontractors by contractors.
Tax is deducted on the labour element of work, not material costs.
The tax deducted is calculated based on the verification status of a subcontractor
Gross status – payments made without deduction of tax.
Net status – payments are made after a 20% deduction for tax.
Not verified – payments are made after a 30% deduction of tax.
Subcontractors can be verified by:
You will certain information from subcontractors in order to verify their tax status:
Limited companies – you will need their company registration number and the company unique tax reference (UTR) which is a 10 digit number (often preceded by a 3 digit tax office number).
Individuals – you will need their national insurance number and their unique tax reference (UTR)
There are a number of different ways:
If you are self employed or a sole trader overpaid tax can be reclaimed:
If you trade through a limited company:
More details can be found here (link https://www.gov.uk/guidance/claim-a-refund-of-construction-industry-scheme-deductions-if-youre-a-limited-company)
Please get in touch if you need help.