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HMRC internal manual

PAYE Manual

Employer records: maintain employer record: construction industry scheme (CIS) - up to 2007

This subject is presented as follows

What is the Construction Industry Scheme?

The Construction Industry Scheme (CIS) is the method by which HMRC records and traces payments made by a contractor to a subcontractor in the construction industry.

The original Construction Industry Scheme was replaced by ‘New CIS’ on 6 April 2007. Information about the new scheme can be found at PAYE21040.

How does the scheme work?

Businesses in the construction industry are known as contractors and subcontractors. They may be companies, partnerships or self-employed individuals.

Contractors pay subcontractors for construction operations.

Contractors responsibilities

Under the scheme a contractors responsibilities include

  • Checking how payments to subcontractors should be made. These fall into two categories

    • Companies holding CIS5 certificates entitling them to gross payments
    • Subcontractors holding Registration cards for whom tax must be deducted
  • Completing the correct monthly vouchers and sending copies to the Construction Industry Processing Centre
  • Completing and submitting an annual return form CIS36

PAYE Employer Office staff (day to day)

It is important that in day to day work processing staff responsible for employer related work maintain the correct scheme type for employers involved in the construction industry. See subject ‘Maintain scheme type’ PAYE27025 when changes occur.

For every employer record with XP or PSC scheme types that are held in an office a link must be made between the BROCS and CIS computers.

The initial link can be made by

  • Processing staff (employer) - following the completion of form CIS1
  • Processing staff (SA) for sole traders or partnerships
  • Processing staff (CT) for limited companies

Contractor details on the CIS computer are updated weekly by BROCS. This continues until the link is broken, by either changing the scheme type to P or the scheme is ceased.

Form CIS1

Form CIS1 must be issued to each new contractor. When completed, the details included are entered onto CIS. This information forms the basis on which the numbers and types of vouchers are issued to each contractor.

CIS vouchers received during the year

From 6 April 2002, companies who have deductions made from their income as subcontractors are able to set-off these deductions against the monthly or quarterly PAYE / NICs and any CIS liabilities due from their employees and / or subcontractors.

It is possible you may receive vouchers during the year from companies who wish to take advantage of these procedures.

You must only retain vouchers from companies who have ceased to trade. If the company is continuing in business

  • Return the vouchers to the employer
  • Ask them to include the details when completing their annual return