The Construction Industry Scheme (CIS) is a UK tax system that applies to contractors and subcontractors working within the construction industry. Under CIS, contractors are required to deduct tax from subcontractor payments and pass these deductions to HM Revenue & Customs (HMRC). Understanding CIS tax rules is essential for staying compliant, avoiding penalties, and managing cash flow effectively.
CIS Tax
CIS Tax
Construction Industry Scheme
Who CIS Applies To
CIS tax applies to:
Contractors – businesses that pay subcontractors for construction work
Subcontractors – individuals or companies carrying out construction work
Deemed contractors – non-construction businesses spending over £3 million on construction in a 12-month period
Construction work includes building, repairs, demolition, groundwork, and decorating, among others.
How CIS Tax Deductions Work
Under CIS, contractors deduct tax from subcontractor payments before paying them. The standard deduction rates are:
0% – for subcontractors registered for Gross Payment Status
20% – for registered subcontractors
30% – for unregistered subcontractors
Deductions apply only to labour, not materials or VAT.
CIS Registration Requirements
Both contractors and subcontractors must register for CIS with HMRC. Registration ensures the correct tax rate is applied and prevents unnecessary over-deductions. Contractors must also verify each subcontractor before making payments.
Monthly CIS Returns
Contractors are required to:
Submit monthly CIS returns to HMRC
Report all subcontractor payments and deductions
File returns even if no payments were made (nil returns)
Late or incorrect submissions can result in automatic penalties.
CIS and Self Assessment
For subcontractors, CIS deductions are not a final tax. They count as advance payments toward:
Income Tax
National Insurance
These deductions are reclaimed or offset when completing the annual Self Assessment tax return.
Common CIS Mistakes
Frequent CIS issues include:
Failing to verify subcontractors
Applying incorrect deduction rates
Missing monthly filing deadlines
Confusing employment status with subcontractor status
Professional guidance helps avoid costly errors.
How an Accountant Helps with CIS
An experienced accountant can:
Register and verify CIS contractors and subcontractors
Prepare and submit monthly CIS returns
Reconcile CIS deductions with Self Assessment
Advise on Gross Payment Status eligibility
This ensures compliance while saving time and reducing risk.
Get Expert CIS Tax Support
CIS tax rules are complex and time-sensitive. Whether you are a contractor or subcontractor, expert accounting support ensures accuracy, compliance, and peace of mind. Contact our team today for tailored CIS tax advice and ongoing support.