If you work in the construction industry, the chances are that you have come across the term ‘construction industry scheme mixed contracts’ or CIS mixed contracts. CIS mixed contracts refer to contracts that contain both construction operations and non-construction operations.

Under the construction industry scheme (CIS), contractors and subcontractors must register with HM Revenue and Customs (HMRC) and deduct money from their payments to subcontractors for tax and national insurance contributions. The scheme applies to all construction work carried out in the UK, including buildings, civil engineering work, and installation work such as heating and lighting.

In the case of CIS mixed contracts, the contractor must work out what proportion of the contract is for construction operations and what portion is for non-construction operations. The CIS only applies to the construction operations part of the contract.

It is important for contractors to accurately determine the percentage of the contract that relates to construction operations and deduct the appropriate amount of tax and national insurance contributions from the subcontractor’s payment. Failure to do so can lead to penalties from HMRC.

Determining whether a contract is a CIS mixed contract depends on a few factors. Firstly, it is important to consider whether the contract is predominantly a construction contract or a non-construction contract. If it is predominantly a construction contract, then it is likely to be a CIS mixed contract.

Secondly, it is important to consider the nature of the work being carried out. If the work is directly related to the construction industry, such as bricklaying or scaffolding, then it is likely to be a construction operation. If the work is not directly related to the construction industry, such as administration or cleaning, then it is not a construction operation.

Contractors and subcontractors must keep accurate records of the amounts paid and deducted for each subcontractor, as well as the proportion of the contract that relates to construction operations. This information should be included on monthly CIS returns to HMRC.

In conclusion, CIS mixed contracts are becoming increasingly common in the construction industry. It is important for contractors and subcontractors to accurately determine the proportion of the contract that relates to construction operations and ensure that the appropriate amount of tax and national insurance contributions are deducted from the subcontractor’s payment. Failure to do so can result in penalties from HMRC. By keeping accurate records and submitting monthly CIS returns, contractors can ensure compliance with the CIS scheme.