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How to Become a Building Contractor

The mainly rural setting of the Essex county means that there is still plenty of available building space left, which makes for a very loose constructions market. Contractors old and new equally share the spoils, while skilled craftsmen are never short of work opportunities (arguably, the dry and moody Essex weather may have much to do with that). But, if you are contemplating of becoming a contractor yourself then you have to follow a particular set of rules, established by the Construction Industry Scheme, or CIS.

First of all, you are obliged to register as a building constructor with the CIS if:

  • You are paying subcontractors (tradesmen) to do any type of construction work (you are a ‘mainstream’ contractor)
  • Your business does no actual construction work but you spend 1 million pounds or more a year on construction in any given three-year period (you are a deemed contractor)

The Construction Industry Scheme covers almost all construction work done to buildings, from site groundwork to refurbishment and decorating.

There are, however, some exceptions that need to be considered. If you are paid for by a trust or a charity, or by a governing body of a school whose maintenance work you’ve done, then CIS does not apply to you. Also, deemed contractors that are paying for work on a property (that is neither for sale nor for rent) for their own business use or are paying for a contract worth no more than 1,000 pounds (without materials) do not fall under the CIS regulations.

Certain jobs are exemptions of the aforementioned scheme, and they include:

  • Carpet fitting
  • Materials delivering
  • Architecture
  • Scaffolding hire

Provided your activity is neither of the above, then these are the rules you are strongly advised to follow:

  1. You must register for CIS prior to taking your first tradesman (subcontractor).
  2. You must verify whether you should hire the person or subcontract the work, if you don’t want to run the risk of getting a penalty.
  3. You have to check with the HM Revenue and Customs if subcontractors are CIS registered.
  4. You must make deductions from the subcontractors’ payments and pay the sum to HMRC. These deducted sums count as payments in advance towards the subcontractor’s National Bill and tax.
  5. You are obligated to hold full CIS records and store monthly returns. The penalty for giving a subcontractor the wrong status in a monthly return can reach 3,000 pounds.
  6. You must let the HMRC know, within 90 days, of any changes to your business (change of address – individual or business, change in business structure – from a limited company to a sole trader and vice versa, if the business ceases or one of the contractors passes away, etc.)

As you can see the building contractor business is extremely well regulated but, as long as you strive to follow all the necessary steps to register yourself accordingly and stay away from procedural blunders, you are surely going to reap the benefits. Some may even say that the real winner is Essex itself.

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