If you're working in the construction sector, how you get paid either through PAYE or under the Construction Industry Scheme (CIS) depends on how your hiring company engages its workforce.
At Genius, we ensure everything is done by the book, keeping both contractors and workers fully HMRC-compliant. Here's a breakdown of what each scheme means for you:
What is PAYE?
PAYE (Pay As You Earn) is the standard method used to pay tax and National Insurance for employees. It's automatically deducted from your wages before they hit your bank account. If you're on the payroll of an umbrella company, you'll likely be paid this way.
What is an Umbrella Company?
An umbrella company is often used by self-employed contractors who don't want to set up their own limited company. You technically become an employee of the umbrella, who processes your pay and deducts tax and NI under PAYE.
But here's where HMRC's concern comes in: some umbrella setups alter how tax is handled in ways that may raise compliance red flags. They change how workers pay tax and NIsometimes straying into tax avoidance territory.
At Genius, we don't work like that. We operate as a CIS intermediary, which means we follow HMRC's CIS rules but structure engagement properly to protect everyone involved.
Why This Matters: Joint and Several Liability (JSL)
With Joint and Several Liability (JSL) soon to be introduced, umbrella companies, and potentially end clients could become jointly liable for unpaid PAYE and NI. This makes choosing the right payroll structureand a compliant partner like Genius more important than ever.
What is CIS?
The Construction Industry Scheme has been around since the 1970s to reduce tax evasion in construction. Under CIS:
A flat 20% tax is deducted from subcontractor invoices (unless they have gross payment status)
Both contractors and subcontractors must register with HMRC
Genius handles this process on your behalf, taking the admin off your plate
What is Gross Payment Status?
Gross payment status means you receive your full invoice payments without deductions, and you sort out tax and NI via your self-assessment.
To qualify, you must:
Work in UK construction (or provide labour for it)
Use a business bank account
Have a good record of paying tax and NI on time
Meet the minimum turnover thresholds:
30,000 for sole traders
30,000 per partner (or 100,000 total) for partnerships
30,000 per director (or 100,000 total) for limited companies
Can You Switch From CIS to PAYE Mid-Year?
Yesyou can move from CIS to PAYE during a tax year. Just be aware that you'll still need to submit a tax return for the CIS portion of the year.
What Are Contractors Responsible For Under CIS?
If you're a contractor, here's what must be done each month:
Submit a CIS300 return to HMRC by the 19th of the following month
Provide subcontractors with payment and deduction statements
Miss a deadline and HMRC issues an immediate 100 fine with escalating penalties the longer the return is overdue.
At Genius, we handle these tasks on your behalf accurately and on time so you can stay focused on the job.
In Summary
The way you're paid matters for your take-home pay, your tax position, and your compliance. With JSL around the corner and increased HMRC scrutiny, now's the time to make sure your engagement structure is watertight.
Genius Money operates fully within HMRC guidelines, using the CIS scheme to protect contractors, workers, and agencies alike.
