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Milsted Langdon tax advice for construction industry subcontractors

Thousands of construction firms across the South West could be at risk of financial penalties, according to award-winning accountants Milsted Langdon. 

The firm, which has offices in Yeovil, Taunton, Bath, Bristol and London, is concerned that not all of those operating in the sector are abiding by the Construction Industry Scheme (CIS) as they should be. 

Subcontractors in the UK construction industry who work for another contractor should, in most cases, be registered for the CIS. 

When checking CIS status, HMRC will look at turnover for the last 12 months. Ignoring VAT and the cost of materials, a subcontractor has to register for CIS if their turnover is at least £30,000 if they are a sole trader or £30,000 for each partner or director in a partnership or limited company, or at least £100,000 for the whole partnership or company. 

Under the CIS, contractors are obligated to deduct 20 per cent from payments to subcontractors, which counts towards the end of year tax and National Insurance bill for the self-employed subcontractor.

If a person doesn’t register for CIS, the contractor they are working with must deduct 30 per cent, which means an instant loss of 10 per cent of income. 

Any overpayment of tax throughout the year through CIS can be reclaimed via a rebate, which can be applied for via the self-assessment tax return. 

Jon Stocker, General Practice Partner at Milsted Langdon, said: “The rules and obligations surrounding the CIS are complex and it is easy to be penalised under the system if you are not careful.

“There are likely to be thousands of subcontractors in the South West alone who are impacted by the CIS and who may not be getting it right. The same can be said for many contractors as well.”

Jon said that contractors could be fined as a result of failing to comply with CIS, with individual penalties ranging up to £3,000. 

These could be issued for not registering as a contractor before hiring a subcontractor, not filing the necessary monthly CIS returns and not verifying subcontractors or incorrectly declaring their employment.

“Even if you have previously used the same subcontractor you must verify them if they haven’t been included on a CIS return for the last two tax years,” added Jon. 

“Critically, if a contractor has gained three penalties for late filing of the monthly return, it may trigger HMRC’s digital systems and the loss of CIS status will be automatic.”

Jon is encouraging subcontractors and contractors within the industry who are unsure of the rules surrounding CIS to come forward and seek help. 

To find out more about Milsted Langdon’s services for the construction industry, please visit

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