Businesses in the property development and construction supply chain are being urged to register for the HMRC’s Construction Industry Scheme (CIS) amid misunderstandings over who it affects.
The warning comes from the Bristol office of accountancy, investment management and tax group Smith & Williamson, whose experts say many firms wrongly believe it only affects those engaged in traditional building and construction activities. 
The scheme requires registration by individuals, partnerships and companies across the supply chain. This includes those involved in engineering works, heating and lighting installation, decorating and potentially even landscaping and gardening services if undertaken as part of a wider construction project.
Businesses that do not register, face a 30% tax hit on the labour element of their invoices. Equally, if they do register but do not keep their affairs in order and comply with stringent reporting requirements, they may also lose their entitlement to be paid gross, suffering a 20% tax charge at source.
Paul Bray, pictured, a tax partner in Smith & Williamson’s property and construction team, who advises on CIS and has won several HMRC appeals on behalf of clients, said: “This isn’t a new tax but it continues to catch businesses out.
“The scheme itself can be quite onerous and is not without its pitfalls, but it does permit the contractor to be paid gross and avoid the cashflow costs of being outside the scheme.
“In addition, it can provide competitive advantage as some of the larger contractors will only permit businesses registered with CIS Gross Payment Status to tender for works. This is partly because CIS registration often signals that a business has its house in order and is being well run.”
Paul warns that non-core construction businesses, such as property investors and commercial landlords carrying out more substantial works, are often unaware of CIS. Several recent legal cases highlight the severity of the penalties being levied for non-compliance and non-registration.
