Understanding the Construction Industry Scheme
If you work in the construction industry, you’ve probably heard of the Construction Industry Scheme (CIS). But if you’ve ever found yourself confused about what it means, how it works, or what you need to do — you’re not alone. We work with a range of property developers and builders who we have helped understand CIS and take that stress away from them.
In this guide, we’ll break down the essentials of CIS for both contractors and subcontractors, so you can stay compliant and avoid costly mistakes.
What is CIS?
The Construction Industry Scheme (CIS) is a set of HMRC rules for how payments to subcontractors in the construction industry must be handled.
- Contractors must deduct money from subcontractors’ payments and pass it to HMRC.
- These deductions act as advance payments towards the subcontractor’s tax and National Insurance.
CIS for Contractors
If you are a contractor, you must:
- Register as a contractor with HMRC.
- Verify each subcontractor with HMRC before paying them. You will need their UTR (Unique tax reference) and NI (National Insurance) Number to do so.
- Deduct 20% for registered subcontractors or 30% for unregistered subcontractors from payments for labour.
- Submit monthly CIS returns to HMRC, detailing payments and deductions by the 19 th of the following month.
- Give each subcontractor a monthly statement showing deductions.
- Make the deduction payments to HMRC on time.
Failing to file returns or deductions on time can lead to penalties.
CIS for Subcontractors
If you are a subcontractor, you must:
- Register to be self-employed and get Unique tax reference (UTR) number
- Register for CIS with HMRC (to benefit from the 20% deduction rate instead of 30%).
- Provide contractors with your details including your UTR and NI number, so they can verify you.
- Keep all deduction statements from contractors (these are proof of your tax already paid).
- Use these statements when completing your annual self-assessment tax return.
Some subcontractors can apply for gross payment status, which means contractors pay them in full without deductions, but this is subject to strict criteria (e.g. good tax compliance, turnover thresholds).
Common CIS Mistakes
Some of the issues we see on a regular basis:
- Contractors forgetting to verify subcontractors before payment.
- Subcontractors not registering for CIS and losing 30% of their pay unnecessarily.
- Missing monthly CIS return deadlines and getting hit with HMRC penalties.
- Poor record-keeping leading to mismatched figures at year-end.
How We Help
CIS doesn’t have to be complicated — but it can easily become stressful if you try to manage it alone.
At R&B Accountants Ltd, we:
- Register and verify subcontractors on your behalf.
- Process CIS deductions and file monthly returns accurately and on time.
- Provide clear deduction statements for subcontractors.
- Help subcontractors reclaim overpaid tax through their self-assessment.
- Advise on whether gross payment status could work for your business.
We take care of the compliance, so you can focus on running your projects.
Final Thoughts
Whether you’re a contractor or subcontractor, understanding CIS is crucial to staying compliant and keeping your cashflow steady. The rules can be tricky, but with the right support, it doesn’t need to be a headache.
Need help with CIS? We’d love to chat. Get in touch with our friendly team today:
