Definition
CIS deductions are the amounts a contractor withholds from a subcontractor’s labour payments under the Construction Industry Scheme and pays to HMRC. The rate is 20% for registered subcontractors, 30% for unregistered ones or those HMRC cannot verify, and 0% for subcontractors with gross payment status. The deductions count as advance payments towards the subcontractor’s tax and National Insurance.
How a deduction is worked out
The contractor starts with the gross invoice and takes off VAT, materials the subcontractor paid for directly, plant hire, consumable stores and fuel other than for travel. The CIS rate applies to what is left.
A registered subcontractor invoices £5,000 (excluding VAT), including £1,000 of materials. The contractor deducts 20% of £4,000, pays £800 to HMRC and £4,200 to the subcontractor, and issues a payment and deduction statement within 14 days of the end of the tax month.
Getting deductions back
- Sole traders and partners: enter them on the Self Assessment return, where HMRC sets them against the tax bill.
- Limited companies: offset them against the company’s PAYE bill using an Employer Payment Summary, then claim a refund for anything left after the tax year. They must not be claimed through the Corporation Tax return.
SmartFiling’s guide explains why CIS deductions are 20% or 30%.
Related questions
- How do I claim back CIS deductions? Through Self Assessment for sole traders, or the EPS and a year-end refund claim for companies; see how to claim a CIS refund.
- How do I get CIS gross payment status? By passing HMRC's business, turnover and compliance tests.
Related terms
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Construction Industry Scheme
The Construction Industry Scheme (CIS) is HMRC's scheme for payments in the construction industry.
Read definition -
Employer Payment Summary
An Employer Payment Summary (EPS) is a Real Time Information report an employer sends HMRC to adjust what it owes under PAYE, rather than to report individual pay.
Read definition
