Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments and pass it to HM Revenue and Customs (HMRC).
The deductions count as advance payments towards the subcontractor’s tax and National Insurance.
Registering as a contractor at the right time
If you want to start paying subcontractors you need to register with HMRC as a contractor just before you pay your first subcontractor. This will avoid the risk of receiving a penalty for any returns becoming due between the date you register and when you start paying subcontractors.
Periods of inactivity
If you are registered as a contractor you may have a period where you do not need to pay any subcontractors. Rather than submitting a series of nil returns for this period, you can ask HMRC to make your scheme inactive for up to six months.
You can do this online or by calling the CIS Helpline. If you start paying subcontractors again during this six month period, simply start filing your returns again and this will end the period of inactivity.
You also need to remember to start sending returns at the end of the inactive period, otherwise you may get a penalty if HMRC are expecting a return from you.
You can renew or extend the period of inactivity beyond six months, but it may be simpler to close your scheme until you start paying subcontractors again. That way you won’t have to remember to extend the period. You can easily re-open your scheme.
If you do not pay any subcontractors in a tax month you no longer need to send in a nil return but you must tell HMRC that no return is due.