CIS FAQS

CIS payroll (at least as far as we are concerned) is an overarching phrase that describes payments that you make to self-employed sub-contractors within HMRC's Construction Industry Scheme, and these are usually day-rate sole traders.

All contractors paying sub-contractors for construction work must register with the CIS. This includes construction companies, non-construction businesses spending more than £3 million over 3 years on construction, and government bodies.

You must register because HMRC requires all contractors to deduct money from sub-contractor payments and pass it to HMRC. Failure to register can result in penalties.

Monday: Portal opens for timesheet submission. Tuesday: Timesheets submitted by 4pm, invoice sent to client by 5pm. Wednesday: Final amendments by 4pm, BACS payments made to sub-contractors by 5pm. Thursday: EEBS receives payment. Friday: Sub-contractors receive payment.

Yes, the CIS is compulsory for all contractors and sub-contractors working in the construction industry.

Sub-contractors submit their timesheets through our online portal. EEBS then calculates the CIS deductions, processes the payments, and pays the sub-contractor directly.

Yes, limited companies can be sub-contractors under CIS and may have CIS deductions made from their payments, unless they have Gross Payment Status.

If a sub-contractor is not registered for CIS, deductions will be made at the higher rate of 30% instead of the standard 20%.

The CIS was introduced by HMRC to regulate tax payments in the construction industry. It requires contractors to deduct money from sub-contractor payments and pass it to HMRC as advance tax payments.

HMRC looks at several factors: Does the sub-contractor supply their own materials? Is there a valid contract? Can they make a loss as well as a profit? Do they have other clients? Do they have control over how work is performed?

Under CIS, contractors deduct money from sub-contractor payments and pass it to HMRC. These deductions count as advance payments towards the sub-contractor's tax and National Insurance.

Contractors must verify sub-contractors with HMRC before paying them.

CIS deductions are calculated on the labour element of the payment. Materials costs are excluded. The standard deduction rate is 20% for registered sub-contractors, or 30% for unregistered ones.

Yes, the CIS number is essentially your Unique Taxpayer Reference (UTR) number. It is used to identify you within the Construction Industry Scheme.

No. CIS is for self-employed sub-contractors and involves deductions at 20% or 30%. PAYE is for employees and involves income tax and National Insurance deductions.

Yes, for CIS purposes, the business paying for construction work is called a 'contractor'.

CIS covers most construction work including: building, alterations, repairs, extensions, demolition, dismantling, site preparation, decorating, cleaning as part of construction, and installing heating, lighting, water and power systems.

Exemptions include: architecture and surveying, scaffolding hire without labour, carpet fitting, delivering materials, manufacturing materials and plant, mining and tunnelling, and work on temporary structures like exhibition stands.

CIS is a tax deduction scheme specifically for the construction industry. Being self-employed is an employment status. You can be self-employed and work under the CIS.

If a sole trader works as a sub-contractor in construction, they will have CIS deductions made from their payments by the contractor. These count as advance tax payments.

Yes – but he must still be verified with HMRC first, and he will have to be paid under the higher rate of deduction – at 30%.

Under normal arrangements and unless a sub-contractor has a self-billing arrangement process, he will supply an invoice to his contractor once the works for which they have been engaged have been completed to the required standard. They will then be paid in accordance with the terms of his contract, and if a specific job takes a number of weeks the payment might be under a “draw-down” arrangement. They might also be paid under a “day rate” arrangement where the sub-contractor is paid in arrears, which is generally weekly, but might also be fortnightly or monthly.

It's no secret that for many years conflict has existed between the UK tax authorities and the construction industry over the employment status of sub-contractors.

This is because we have up to seven times more people in self-employment in the construction industry compared to any other sector of the economy (except the performing arts), and HMRC ignores the historic and practical reasons for our reliance on self-employment and take the view that the difference is simply "disguised employment" rather than a genuine choice for both individuals and contractors and view this as just a ruse for avoiding employers national insurance contributions.

Our margin is calculated as either a percentage or fixed fee per sub-contractor engaged, per week paid. We aim to earn between £6 and £16 a week per sub-contractor, depending on the numbers engaged.

No. There are no set up fees for clients or sub-contractors, nor tie-in periods. In effect we provide "pay as you use" service. No notice is required to terminate our agreement.

We can set you up within a day!

Under EEBS Contract of Services it has always been a requirement that sub-contractors insure themselves with Public Liability Insurance.

Option 1: Labour only sub-contractors may already be covered by a contingent element of your own employer's liability insurance. If you wish to continue this arrangement, we ask you to sign a declaration to this effect.

Option 2: The sub-contractor must obtain their own policy through the insurance market, and provide EEBS with a copy of your policy, or

Option 3: If proof of the above is not submitted then they will be covered by EEBS contingent Public Liability Insurance that covers EEBS own position, should legal liability exposure that could fall on EEBS Ltd arising from the negligence of a sub-contractor, the sub-contractor will be covered by EEBS policy. The weekly fee for this cover is around £4 and charged to the sub-contractor.

Yes, after consultation with our Tax Advisors and directly with HMRC, EEBS apply the VAT Domestic Reverse Charge Scheme to services that we supply to our clients. This is because we "buy in", and subsequently "sell on" a sub-contractors construction services rather than just their labour only.

We create an unbreachable legal firewall between yourself and the sub-contractors that prevents the HMRC from re-classify the individuals as your employees, as allows you to match workforce to workload.

Yes – If, after a status investigation HMRC were to challenge our arrangements, or if a sub-contractor were to take you to an employment tribunal whilst being supplied by us, we will manage the entire process for you, with full legal support. If we were to lose the case (and to date we have never lost a case) we would pay all the associated costs.

Throughout our business life we have experienced more than 50 HMRC client status inspections, and to date HMRC have never challenged the arrangements that we have in place.

By Chaps or Bacs, with cleared funds on the Wednesday of the week payment is due.

EEBS is a gross payment sub-contract intermediary.

No – we work exclusively for the construction industry, and specialise in compliant solutions specifically for the industry.

• They have to be registered for CIS and have a UTR number
• Their CIS is deducted and paid over to the HMRC in real time
• They receive a text, and a payslip by email, and yearly statements
• We can complete their annual tax return for £99+vat

IR35 is a piece of tax legislation that only targets individuals who have their own limited companies. It's been high profile lately because some recent changes have moved the potential tax liability from the individual, to the client. But don't worry – working with EEBS will completely eliminate the problem for you, making it our issue not yours!!

EEBS provide you with a bespoke online portal for uploading sub-contractor payments. We take full responsibility for the employment status of these sub-contractors and liaise with HMRC for the reporting of the payments made. This greatly reduces your monthly CIS burden as you only report the monthly payments to EEBS as well as preventing HMRC reclassifying your sub-contractors as employees whilst reducing the risk of employment rights claims.
In addition, EEBS will:

• Verify each sub-contractor with HMRC
• Calculate and pay each sub-contractor in line with your current agreements
• Text each sub-contractor the amount they are going to be paid
• Provide both a payment statement (for each time the sub-contractor is paid) and an annual CIS deduction statement
• Provide limited public liability insurance, if required.

EEBS Weekly Payment Process:
Please note that EEBS can make payments on a weekly, bi-weekly or monthly basis.

1. Monday – The online portal is open for payment submission
2. Tuesday – payments are submitted to us online by 4pm
3. Wednesday – EEBS payroll team make any final amendments or adjustments until 4pm. After 4pm all clients are invoiced and sub-contractors received their text message detailing the amount they will be paid.
4. Friday – sub-contractors receive payment.

We have quite a few clients who have been with us for more than 10 years, and some go as far back as 2003!

It’s no secret that for many years conflict has existed between the UK tax authorities and the construction industry over the employment status of sub-contractors.
This is because we have up to seven times more people in self-employment in the construction industry compared to any other sector of the economy (except the performing arts), and HMRC ignores the historic and practical reasons for our reliance on self-employment and take the view that the difference is simply “disguised employment” rather than a genuine choice for both individuals and contractors and view this as just a ruse for avoiding employers national insurance contributions.

Gross Payment Status allows you to receive full CIS payments without deductions. This significantly improves your cash flow as you don't have to wait for HMRC to refund over-deductions.

To qualify, you must: have paid your tax and NI on time, do construction work in the UK, operate through a bank account, and meet the turnover test (£30,000 for sole traders, or £30,000 per partner/director or £100,000 for the entity).

You will fail the scheduled review and risk losing GPS if: contractor returns are late four or more times, any return is over 28 days late, PAYE/CIS payments are late four or more times, any payment is more than 14 days late, self-assessment or Corporation Tax payments are late, or any payment over £100 is outstanding.

You can re-apply for GPS 12 months after it was withdrawn. You will need to demonstrate that you have been fully compliant with all HMRC obligations during that period.

Three main reasons: 1) Historic Model - the industry has always relied heavily on self-employed tradespeople. 2) Simplicity - self-employment offers flexibility for both parties. 3) Costs - engaging employees is approximately 40% more expensive than self-employed sub-contractors.

The additional costs include: Employers National Insurance (currently 13.8% above the threshold), holiday pay (typically 12.07% of earnings), pension contributions (minimum 3%), sick pay obligations, and the administrative burden of full PAYE compliance.

An Employment Status Review is an investigation by HMRC into whether the individuals you engage as self-employed sub-contractors should actually be classified as employees for tax purposes.

EEBS will manage the entire process for you with full legal support. If we were to lose the case (and to date we have never lost a case), we would pay all the associated costs. That is the EEBS guarantee.

Employment law has two strands: tax law (governed by HMRC, determining whether someone is employed or self-employed for tax purposes) and employment rights law (governed by employment tribunals, determining rights such as holiday pay, unfair dismissal protection, and pension entitlements).