CIS – Construction Industry Scheme
Work covered by CIS
CIS covers most construction work to:
a permanent or temporary building or structure
civil engineering work like roads and bridges
For the purpose of CIS, construction work includes:
preparing the site, eg laying foundations and providing access works
demolition and dismantling
alterations, repairs and decorating
installing systems for heating, lighting, power, water and ventilation
cleaning the inside of buildings after construction work
You must register as a contractor with the Construction Industry Scheme (CIS) if:
you pay subcontractors to do construction work
your business does not do construction work but you usually spend more than £1 million a year on construction
You may be a sole trader, in a partnership or own a limited company.
Rules you must follow
You must register for CIS before you take on your first subcontractor.
Check with HM Revenue and Customs (HMRC) that your subcontractors are registered with CIS.
When you pay subcontractors, you’ll usually need to make deductions from their payments and pay the money to HMRC. Deductions count as advance payments towards the subcontractor’s tax and National Insurance bill.
You must let HMRC know about any changes to your business
You must register your business for VAT with HM Revenue and Customs (HMRC) if its VAT taxable turnover is more than £85,000.
When you register, you’ll be sent a VAT registration certificate. This confirms:
your VAT number
when to submit your first VAT Return and payment
your ‘effective date of registration’ - this depends on the date you went over the threshold, or is the date you asked to register if it was voluntary
You can register voluntarily if your turnover is less than £85,000, unless everything you sell is exempt. You’ll have certain responsibilities if you register for VAT.
Your VAT responsibilities
From your effective date of registration you must:
charge the right amount of VAT
pay any VAT due to HMRC
submit VAT Returns
keep VAT records and a VAT account
Most VAT registered businesses that earn over £85,000 must also follow the rules for ‘Making Tax Digital for VAT’.
Capital Gains Tax
Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.
It’s the gain you make that’s taxed, not the amount of money you receive.
Example: You bought a painting for £5,000 and sold it later for £25,000. This means you made a gain of £20,000 (£25,000 minus £5,000).
If you sold property in the UK on or after 6 April 2020
You must report and pay any tax due on UK residential property using a Capital Gains Tax on UK property account within 30 days of selling it.
You may have to pay interest and a penalty if you do not report gains on UK property within 60 days of selling it.
Types of Business Entity
Sole Traders are the simplest form of business. Normally one person, although you can still employ other people. You must register when you start trading and you need to complete a Self Assessment Tax Return for each year.
This is where two or more people are running a business together but are not a Limited Company. If your business runs as a partnership you have to do a Partnership Tax Return and each Partner also has to do a Self Assessment Tax Return.
Some Business’s decide to trade as a Limited Company, this gives the business its own Identity separate to its owners (Directors).
The Directors are then classed as employees in most cases.
If you trade as a Company, there are stricter rules regarding Accounts and the Procedures you must comply with.
You have to do an Annual Return with Companies House and Pay an Annual Fee of £13.
You have to submit accounts to Companies House within 9 months of the Companies Year End.
You also have to submit a Corporation Tax Return and Company Accounts to HMRC.
As it stands, unless you buy special software, you cannot submit the CT return and Accounts yourself as there is a special format required to upload it to the HMRC website.
Running A Business
It is important to know how your business is doing, to do this you need to keep records of your Sales, Purchases and Other Expenses.
You can keep these records in a hand written accounts book, on a spread sheet or using accounts software. It is important to keep these up to date.
I can help you set up whichever method suits you best, this will mean when it comes to producing your Accounts and Tax Return your Accountancy charges will be less.
The biggest mistakes businesses make
Not invoicing your customers regularly
Not paying your suppliers on time
Not keeping any records
Not having a separate business bank account