The Construction Industry Scheme (CIS) is a tax deduction scheme for payments made by contractors to subcontractors in the UK construction industry. Understanding your obligations is essential to avoid penalties.
Who Does CIS Apply To?
CIS applies to contractors who pay subcontractors for construction work. This includes:
- •Main contractors and sub-contractors in the building industry
- •Property developers and property investors who spend more than £3 million on construction in any 12-month period
"Construction work" includes most activities involved in constructing, altering, repairing, or demolishing buildings or structures — but excludes activities like architecture, surveying, and carpet laying.
Contractor Obligations
If you are a contractor, you must:
1. Register with HMRC as a CIS contractor
2. Verify each new subcontractor with HMRC before making the first payment
3. Deduct the appropriate rate from payments:
- 0% — gross payment status (awarded to reliable subcontractors)
- 20% — standard rate (for registered subcontractors)
- 30% — higher rate (for unregistered subcontractors)
4. Submit monthly CIS returns — due by the 19th of each month for the prior tax month
5. Provide subcontractors with deduction statements within 14 days of each tax month end
6. Pay the deductions to HMRC by the 22nd of each month (or 19th for postal payments)
Subcontractor Obligations
Subcontractors should:
- •Register for CIS to benefit from the 20% rate (rather than 30%)
- •Apply for gross payment status if eligible (requires a satisfactory compliance and turnover record)
- •Reclaim any over-deducted CIS tax through their Self Assessment return or company tax return
Common Mistakes
- •Failing to verify subcontractors — particularly when a familiar subcontractor starts a new company
- •Missing monthly return deadlines (penalties start at £100 and escalate quickly)
- •Incorrectly including or excluding VAT from the CIS calculation (CIS deductions apply to the labour element only, excluding materials and VAT)
- •Not keeping adequate records of verification, deductions, and payments
We Handle CIS for You
We act for contractors and subcontractors across Greater Manchester and beyond. We handle monthly CIS returns, subcontractor verification, deduction statements, and year-end reconciliation — so you stay compliant and focused on your projects.