CIS in brief
The Construction Industry Scheme (CIS) is a tax deduction scheme for work in the UK construction industry. When a contractor pays a subcontractor for relevant construction work, they may need to make a deduction and pass it to HMRC. The deduction is recorded against the subcontractor’s tax position; it is not an extra fee charged by the contractor.
CIS has specific rules about the work and businesses it covers, so it is worth checking whether a particular contract falls within the scheme before payment is made.
Who it applies to
CIS applies to contractors and subcontractors carrying out certain construction operations. A business can count as a contractor even when construction is not its main trade, for example when it spends significant amounts on construction work. Subcontractors should make sure their details are registered correctly so contractors can verify them with HMRC.
How deductions work
Before paying a subcontractor, the contractor checks their registration and deduction status with HMRC. The status determines whether a deduction is required and at what rate. Contractors then report deductions to HMRC, while subcontractors use their CIS statements when working out their tax position.
Ask for a clear payment statement each time. It should help you reconcile the gross amount, any deductions, and the amount that reached your account.
Records to keep
Keep your paperwork together so you can check payments and respond to questions. Useful records include:
- Invoices and agreed payment terms
- Payment statements showing gross payments and CIS deductions
- Details of contractor and subcontractor verification
- Correspondence about disputed amounts or corrections