Frequently Asked Questions

The sections below contain our most commonly asked questions and answers relating to CIS and PAYE. If you do not find the answers you're looking for, please feel free to contact us directly with your enquiry.

CIS Questions

What is CIS?: Show Answer

The Construction Industry Scheme (CIS) is a set of special rules for handling payments made by contractors to subcontractors for construction work. The scheme applies mainly to contractors and subcontractors in mainstream construction work, however businesses or organisations whose core activity isn't construction but have a high annual spend on construction may also count as contractors and fall under the scheme.

Further details on this are available directly from the HM Revenue & Customs (HMRC) CIS Subcontractors helpline on 0845 366 7899 (8.00 am to 8.00 pm, seven days a week) or via the HMRC website at www.hmrc.gov.uk/cis
I work in the construction industry. How do I know that the work I do is covered by CIS?: Show Answer

A CIS status is defined by a clear set of rules to help you decide whether you fall within the scheme. As a rule you have to be self-employed and as such your status is different to that of an employee working directly for a company under Pay As You Earn (PAYE).

If you are unsure about your compliance and require further advice and information, you should contact the HMRC CIS Subcontractors helpline on 0845 366 7899 (8.00 am to 8.00 pm, seven days a week) or via the HMRC website at www.hmrc.gov.uk/cis
I work in the construction industry and want to be self-employed. How do I become registered under the new Construction Industry Scheme (CIS)?: Show Answer

It is FREE to apply for CIS status with HMRC. If you're intending to work within construction you'll want to register before you start doing so. If you don't register, deductions will be made from your payments at the higher rate (30%).

You can register by calling the HMRC CIS Helpline on Tel 0845 366 7899 (8.00 am to 8.00 pm, seven days a week). You will be asked for the name of the business you want to register (your own name if you trade under it as a self-employed individual), your address, date of birth and your Unique Taxpayer Reference (UTR).
What tax deductions will be made from my pay under the CIS scheme?: Show Answer

When you provide Sprite with your UTR number, we will contact HMRC to verify your CIS status. This will determine the rate of deduction made from your gross pay. Most subcontractor deductions are made at 20%.

In certain circumstances CIS subcontractors will be verified for 0% (gross) deductions. If HMRC cannot match your details under CIS or if they instructed us, you will be deducted tax at 30%.
Will I receive holiday pay if I am self-employed (CIS)?: Show Answer

When you are self-employed you take responsibility for your own holiday pay arrangements. Most agencies will agree a rate with you that includes holiday pay in accordance with the Working Time Directive legislation. Occasionally, the rate agreed may exclude holiday pay, which would be shown separately on your contract.
Do I need to pay National Insurance (NI) as self-employed (CIS)?: Show Answer

Yes. If you are self-employed you must keep up with your Class 2 National Insurance contributions, which for the 20010/11 tax year are payable at a flat rate of £2.30 a week. You may make these contributions monthly by direct debit (taken in arrears, usually on the second Friday of the month) or you may opt to receive a quarterly bill payable by cheque, debit card or bank giro.

Quarterly bills are issued in arrears in July, October, January and April. They must be paid within 28 days of the bill date in order to avoid incurring penalties for late payment. Payment can be made at a bank or Post Office, or by telephone, Internet or post.

You also pay 'Class 4' National Insurance contributions as a percentage of your taxable profits - you pay eight per cent on annual taxable profits between £5,715 and £43,875 and one per cent on any taxable profit over that amount.

If your earnings in the 20010-11 tax year are expected to be less than £5,075 then you may be entitled to the Small Earnings Exception, meaning you don't have to pay any Class 2 National Insurance contributions - you can apply for Small Earnings Exception certificate for the 20010-11 tax year on form CF10.

For further advice and information contact the HMRC Newly Self-Employed Helpline on 0845 915 4515.
Can I claim expenses as self-employed (CIS)?: Show Answer

Yes. You can claim your business expenses annually when you complete your Self Assessment Tax Return. Remember, you must keep your expense receipts for up to six years in the event that HMRC wish to enquire into your tax return.

We have negotiated with a number of accountancy firms a special rate for completing Self Assessment Tax Returns for our clients. Please, contact us should you require their services.
Self Assessment Tax Return – how does it work?: Show Answer

If you have income from self-employment you will be required by law to file an Income Tax Return with HMRC. You must declare all your income in the return and this is also where you can claim the expenses you incurred during the year.

The total amount of tax due is then calculated based on your taxable profit (which is your earnings minus any expenses claimed). Any tax payments you have already made, usually at 20%, during the year is set off against the total amount of tax due and you could end up with a tax refund if you have paid too much tax.

From 6 April 2008 certain changes have applied to the self-assessment tax regime. A new redesigned tax return is also being introduced:

You must file paper returns by 31 October – e.g. 31 October 2008 for tax year 2007/08. The same date applies if you want HM Revenue & Customs (HMRC) to calculate your tax liability for you.

For returns filed online, 31 January will continue to apply – e.g. 31 January 2009 for tax year 2007/08. HMRC automatically calculates your tax liability when you file a return online.

Either way, you will have until 31 January following the end of the tax year in which to amend your self-assessment return. You can file the return yourself, use an accountant or use the services of our in house team.
Where do I find further information on CIS?: Show Answer

The best place to find further information on any of the above, as well as to keep yourself up-to-date on changes in the CIS legislation is from the HM Revenue & Customs (HMRC) CIS Subcontractors helpline on 0845 366 7899 (8.00 am to 8.00 pm, seven days a week) or via the HMRC website at www.hmrc.gov.uk/cis

You may also contact your account manager at Sprite on 0845 643 0600 for further assistance.

PAYE Questions

What is an Umbrella PAYE company?: Show Answer

An Umbrella Company allows independent contractors the opportunity to secure a contract without the need to set up a Limited Company.

This is an equally good alternative for workers who are new to contracting, as well as for those who wish to focus on securing work and leave the administration to someone else.
Why do I have to pay Employers' National Insurance?: Show Answer

Technically you do not pay Employers National Insurance (Ers' NI) but it is deducted and paid from the agency income that Sprite receives for supplying your services. The rate that Sprite negotiates with your agency includes all employers related costs including holiday pay and employers national insurance. Employment agencies often refer to this rate as the limited company rate and this rate of pay is higher than if you were being paid directly by the agency. We deduct Ers' NI and pay this across to the Inland Revenue before we calculate your pay, which is the rate that Sprite pays you, not the rate that Sprite receives from an agency.