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How to operate the Construction Industry Scheme (CIS) in a limited company or Sole trader?

Contractors registered under the Construction Industry Scheme (CIS) are required to deduct the following tax from their payments to subcontractors:

20% deduction (if the subcontractor is registered for CIS); or
30% deduction (if the subcontractor isn’t registered for CIS).


These deductions are paid by the contractor to HMRC as an advance towards the subcontractor’s tax liabilities.

 

Alternatively, the subcontractor can apply for gross payment status. This means contractors will pay you (or your limited company) in full, without deductions.

If you’re a CIS subcontractor working through your limited company, any CIS deductions made by a contractor from income due to the company can be offset against the company’s Corporation Tax liability or refunded directly to the subcontractor by HMRC after the end of the tax year.

The position is the same if you’re a sole trader, but in this situation, any CIS deductions taken from you as a subcontractor are offset against your Personal Tax liability and will be picked up in your annual Self-Assessment.

The relationships between these transactions are complex, and we’ve broken them down into various situations you may come across.
 


 

What are the benefits of a CIS limited company?

  • Monthly deduction of only 20% as opposed to 30% if you are not CIS registered


  • The chance to apply for gross payment status and once you are on gross payment status you can enjoy the additional payment benefits of a limited company


  • The option to pay yourself a dividend as the shareholder of your own limited company


  • Making expense claims such as tools and equipment for your construction work


  • Tax relief on pension contributions


  • Additional tax savings and flexibility and control over your finances

  • You can find more information about the benefits of running your own CIS registered limited company by visiting our limited company page.

What MSR Group will do ?
  • Your CIS registration forms

  • Company Incorporation

  • Corporation Tax and PAYE Registration

  • VAT Registration (where applicable)

  • FRS Registration (where applicable and appropriate)

  • Your administration (monthly returns)

  • Manage HMRC compliance on behalf of you?

020 8514 2678  Opt:2

  • If you want register for CIS company or Sole trader!

  • Need Personal Tax Return experts!

  • Have any issues claiming your deduction?

  • Have any issues raising invoice and claiming expenses?

  • Please call us or email us.