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Am I a subcontractor?

I run a limited company and deliver electrical services. I recently did some work for another company and they deducted 20% tax! Is that correct? I have never had that happen before.

The Construction Industry Scheme (CIS) is a set of special rules for handling payments for construction work that contractors make to subcontractors. The scheme covers all construction work carried out in the UK, as well as some other related work. If your business is involved with construction operations then it might operate as a contractor or as a subcontractor – or as both.

Under the rules of CIS you're a subcontractor if you agree to do construction work for a contractor. Subcontractors can be self-employed individuals, any type of business (such as sole traders, partnerships or limited companies), or other bodies and organisations. 

It doesn't matter how you complete the work – you could do it yourself, get your employees to do it, use your own subcontractors or make some other arrangement. And it also doesn't matter if you don't normally think of yourself as a subcontractor; you could still be treated as one under CIS.

So unfortunately, your customer (the contractor) may well have been correct to deduct tax from your invoice.

If you'd like to find about more about the Construction Industry Scheme and how it may be possible to receive your payments gross, get in touch with us now and we can arrange a meeting to discuss it all with you.

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0800 0523 555

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