There are many benefits of working as a sub-contractor with One Click Umbrella. You will be able to claim back business expenses, pay less NI contributions, have access to our online portal to help control your expenses, and receive help and advice from our friendly team. You will also benefit from the fact that you will not be charged any hidden fees and most of the admin work is done for you; we handle the contracts, invoices and purchases orders with the agency or company. It’s as easy as that!
To get started, you need to be registered as self-employed with HMRC and have your own unique tax reference. You can then register under (Construction Industry Scheme) CIS as a sub-contractor, which we will verify with HMRC.
What Is CIS?
CIS stands for Construction Industry Scheme. The scheme offers a special set of rules established by the tax office to handle payments made by contractors to subcontractors for construction work.
The primary reason for its creation by the government was to reduce tax avoidance and tax evasion, which has been quite prevalent within the construction industry.
The scheme works by enabling contractors to deduct money from a subcontractor’s payment to be sent straight to HM Revenue and Customers (HMRC). It acts in a similar way to PAYE, where either 20% or 30% (depending on whether the sub-contractor is registered with CIS) is deducted from a self-employed construction subcontractor’s payment. The payment to HMRC is then made on their behalf.
The deductions work as an advanced payment towards the subcontractor’s tax and National Insurance. The Construction Industry Scheme helps to spread some of the tax liability over the financial year, avoiding a huge end-of-year tax burden. For most subcontractors registered for CIS, they have no income tax to pay at the end of the year, as it’s already been paid. They may even qualify for a tax rebate after claiming expenses back from tax they’ve already paid.
Contractors must register for the scheme, and to be eligible they must either:
- Pay subcontractors for construction work
- Spend an average of more than £1 million a year on construction work within a 3-year period.
A subcontractor does not have to register for the scheme, but will end up having the higher rate deducted from their pay (30%) if they don’t. To register as a subcontractor, you must be doing construction work for a contractor.
Work Covered by CIS
CIS will cover most construction work to:
- Civil engineering work (e.g. roads and bridges)
- A permanent or temporary building or structure
Other construction work for the purpose of CIS includes:
- Preparing the site (e.g. laying foundations and providing access works)
- Dismantling and demolition
- Building work
- Repairs, decorating and alterations
- Installing systems (e.g. heating, lighting, power, water and ventilation)
- Cleaning the insides of building after construction work
How the Construction industry scheme service works
Once you have registered under CIS as a sub-contractor and we have received verification, it will take no more than 48 hours to set you up with a One Click Umbrella CIS account. Once the contract is agreed, you will receive two copies of the Services and Self-Billing Agreement between you and One Click Umbrella. You will need to sign one of each and return them to us. All you need to do afterwards is tell your agency or company the date from which you will work with us and we will agree with them a deal for your services.
You will be paid for all your services – this will require an invoice, submitted by you, detailing the work you have done which we can issue through a self-billing arrangement. Any money due to you will be paid to you on the same day at no extra charge. As a sub-contractor, you will be required by law to deduct 20% of your earnings to tax, which we will send to HMRC on your behalf.
You will also be required to file an annual tax return with HMRC at the end of each tax year. You must pay any tax due once they have processed your tax return. We are happy to send through the post any advice that you need on tax remittance and we offer a free optional text message service confirming payments to your account. The cost for the service is only £21 per week (this can be offset as a business expense against your tax bill).
Another important point to remember is that all self-employed contractors must have public liability insurance, which you will be required to send us a copy of. We can arrange this for you at a small cost. It is advised to arrange personal accident insurance too. This can also be done by us.
If you have any questions regarding this information, or you just need some advice, our friendly team is here to deal with any queries you have between 9.00 a.m. and 5.30 p.m