Questions & Answers: Am I a subcontractor?

I run a limited company and deliver plumbing services. I recently did some work for another company and they deducted 20% tax. It has never happened before on other contracts. Is that correct?

The Construction Industry Scheme (CIS) is a tax deduction scheme which involves tax being deducted at source from payments which relate to construction work in the UK, as well as some other related work.

Under the rules of CIS you’re a subcontractor if you agree to do construction work for a contractor. Subcontractors can be self-employed individuals, any type of business, such as sole traders, partnerships or limited companies.

It doesn’t matter how you complete the work – you could do it yourself, get your employees to do it, use your own subcontractors or make some other arrangement. And it also doesn’t matter if you don’t normally think of yourself as a subcontractor; you could still be treated as one under CIS.

So unfortunately, your customer may well have been correct to deduct tax from your invoice.

You can read more about the CIS here.

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Written by Shaima Todd.