But What is CIS
The Contractor’s Regulator (CIS) is an independent body that sets out regulations for contractors. Under the CIS, the term “contractor” covers both businesses that undertake construction as a key activity, including those who construct buildings, residential properties, offices and shops, infrastructure projects (such as schools and colleges), environmental works, civil engineering projects and a variety of others.
It was established in 1994 with the intention of improving the effectiveness of the UK construction market. The CIS is managed by the UK government, with independent organizations providing advice and support on the regulation of the contractors market. Also read Corporate Tax Rates For Individual Citizens
The government also provides funding to the associations of contractors and offers training to help them achieve high standards of certification. As part of the wider efforts to promote better business practices among contractors, the government also publishes the Code of Professional Practice and Code of Ethics for Contractors.
Cost Accounting Records
There are two main classes of individuals that the CIS looks at when it comes to licensing and certification: businesses with one person and corporations with multiple people. Businesses with just one person are known as Sole Producers; they have to produce and manage their own projects, and have to show evidence of this through a written proposal and their cost accounting records.
A sole producer may also be a company that manufactures a product that it sells under its own name – for example, a manufacturer of photocopiers. These businesses are then examined to find out if they fit within the scope of the Code of Conduct.
Benefits of CIS
There are two types of businesses that the CIS will consider if it is investigating a contractor’s record. Firstly, if the contractor is a corporation, then the CIS will look at the nature of its activity. This includes looking at how many workers, whether it is an ongoing activity or just a one-off initiative. If the activity is ongoing, then the company should be accredited throughout the duration of the contract; otherwise it will be deemed unsuitable and the contractor would then be obliged to re-certify.
The second category of contractors is those who are sole practitioners, i.e. they are self-employed and do not belong to a company. Therefore, they are considered to be in the ‘other’ category of businesses that the CIS will examine.
For these contractors, the CIS will look at the quality of the business plan, any training and courses that they hold and any professional accreditation that they may have. All considered contractors will have to undertake construction business management and accounting – two essential considerations in achieving successful completion of a project.
Training and Accreditation
Training and accreditation must continue throughout the life of a project, so ensure that your accountant will continue to hold an accountant’s license throughout the duration of the construction industry scheme (CIS). If you are undertaking construction work yourself, ensure that your accountant is also accredited by the Institute of Chartered Accountants in UK.
If you are using a company as your consultant for your financial planning and accounting needs, check that the company holds a cheque book and that all the relevant accountants are employed by the company. If you do not need to pay a consultant a fee, then it is advisable to pay a visit to a few of the different accounts offices so that you can identify one that you are happy to use.
Identify your subcontractors carefully – the fewer the subcontractors, the less the monthly payments made. It is important to identify your subcontractors accurately as the construction companies may send you payment without you knowing. Your selected CIS consultant will then prepare your monthly returns. It is a good idea for your chosen CIS consultant to get in contact with you and discuss the importance of ensuring accurate identification. If the consultant cannot get you an accurate ID, then they may have to incur charges for re-filing your return.
Self Employed Contractors
The final classification of contractors is those that fall into the ‘other’ category i.e. self-employed, business revenue earning contractors, and others. You should ensure that your CIS representative knows exactly what type of contractors you are working with. This is because some unscrupulous contractors (such as builders who don’t have the proper permits) may be trying to avoid payment status reporting, or worse still trying to charge your business unreasonable fees.
Self-employed contractors will be required to undertake construction work within UK territorial waters and must provide UK notice of acceptance and completion. Business revenue earning contractors will be required to undertake construction work within UK territorial waters and to obtain an undertaking order from the UK government.
The different types of contractors will require different levels of authorization to carry out different types of work within the UK territory. There are four classes of contractors. These are business builders contractors, self-employed contractors, business income earning contractors, and other contractors.