CIS Payroll Glossary
When choosing CIS as your payroll model, there are lots of abbreviations and terms to take note of. They can be confusing so we have collated a list of CIS terminology for you to refer to whenever you need it.
CIS stands for the Construction Industry Scheme, a scheme introduced by HMRC (His Majesty’s Revenue and Customs) to prevent tax evasion in the construction industry. The scheme is used by contractors and subcontractors to manage their tax obligations, ensuring compliance with HMRC regulations.
CIS deductions are the percentages of money that contractors deduct from a subcontractor’s payment. These deductions are then submitted monthly to HMRC. The rates can be 20% or 30%, depending on the subcontractor’s registration status with HMRC.
CIS returns are regular reports submitted to HMRC that detail the payments made to subcontractors, including the amounts deducted. This helps HMRC ensure compliance with the scheme.
A contractor is a business or individual who hires subcontractors to complete work in the construction industry. Contractors are responsible for deducting and submitting CIS payments to HMRC.
ESI stands for Employment Status Indicator, an online tool provided by HMRC to help determine the employment status of workers. Supervision, Direction, and Control (SDC) can also be used to determine whether a worker is an employee or a subcontractor.
Subcontractors who meet certain criteria can receive payments without deductions, known as having gross payment status. To qualify, they must demonstrate a good compliance record, annual turnover, and other criteria set by HMRC.
Material Costs are expenses for materials that can be deducted from the total payment before applying the CIS deduction percentage, thereby reducing the amount subject to deduction.
Subcontractors who do not meet the criteria for gross payment status receive payments with CIS deductions, known as having net status.
The scheme rate is the percentage at which CIS deductions are made, determined based on the subcontractor’s tax status. The standard rates are 20% for registered subcontractors and 30% for those who are not registered.
A subcontractor is a person or business hired by a contractor to perform specific tasks within a construction project. Subcontractors are subject to CIS deductions unless they have gross payment status.
Tax treatment refers to how payments made under the CIS are treated for tax purposes, including deductions and submissions to HMRC.
A UTR (Unique Taxpayer Reference) is a 10-digit number assigned to individuals and companies for tax purposes by HMRC.
Verification is the process of confirming the status of a subcontractor with HMRC for CIS purposes, determining the correct deduction rate to apply (0%, 20%, or 30%).
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