Definition
The Construction Industry Scheme (CIS) is HMRC’s scheme for payments in the construction industry. Contractors deduct money from subcontractors’ labour payments and pass it to HMRC as advance payments towards the subcontractor’s tax and National Insurance. Contractors must register, while subcontractors who register suffer deductions of 20% instead of 30%.
Contractors and subcontractors
- Contractors register before taking on their first subcontractor, verify each subcontractor with HMRC, make deductions and file a CIS monthly return by the 19th after each tax month.
- A business that does not do construction work becomes a “deemed” contractor if it spends more than £3 million on construction in the 12 months since its first payment.
- Subcontractors can be sole traders, partnerships or limited companies, and those with gross payment status are paid without deductions.
What CIS covers
CIS covers most construction work, including site preparation, building, alterations, repairs, decorating and installing heating, lighting or power systems. Architecture, surveying, carpet fitting, scaffolding hire without labour and delivering materials fall outside it. Deductions apply to labour, not to VAT or materials the subcontractor paid for.
SmartFiling explains what the Construction Industry Scheme is in more depth, and its CIS returns service verifies subcontractors and files monthly returns.
Related questions
- What is CIS, and do I need to register? Anyone paying subcontractors for construction work must register as a contractor; subcontractors register to cut deductions to 20%. See how to register for CIS.
- How do I get CIS gross payment status? By passing HMRC's business, turnover and compliance tests; see gross payment status.
Related terms
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CIS deductions
CIS deductions are the amounts a contractor withholds from a subcontractor's labour payments under the Construction Industry Scheme and pays to HMRC.
Read definition -
VAT reverse charge
The VAT reverse charge is a rule that makes the customer, not the supplier, account for VAT on certain supplies.
Read definition
