If you work in construction in the UK, the Construction Industry Scheme (CIS) is almost certainly going to apply to you. It's HMRC's way of making sure tax gets paid on construction work, and it shifts the responsibility for collecting some of that tax onto whoever is paying for the job.
Done right, it's straightforward. Done wrong, you can end up overpaying tax for years. Here's the short version.
Who CIS applies to
CIS covers most construction work in the UK — site preparation, building, alterations, repairs, decorating, demolition and dismantling. There are two roles in the scheme:
- Contractors: businesses that pay subcontractors for construction work. This includes property developers and any other business that spends more than £3 million a year on construction.
- Subcontractors: businesses (or self-employed individuals) that carry out the work for a contractor.
- Many businesses are both — taking on work from larger contractors while paying their own subbies.
How the deductions work
When a contractor pays a subcontractor, they have to deduct money from the labour part of the invoice and pay it directly to HMRC. This counts as an advance towards the subcontractor's tax and National Insurance.
Materials, VAT, plant hire and certain other costs are not subject to CIS deductions — but you must show them clearly on your invoice.
- 20% deduction — the standard rate for subcontractors registered with CIS.
- 30% deduction — for subcontractors who haven't registered with CIS.
- 0% deduction (gross payment status) — for subcontractors who meet HMRC's turnover and compliance tests.
What contractors need to do each month
Late returns trigger automatic £100 penalties, which escalate quickly — keep on top of the deadline.
- Verify every new subcontractor with HMRC before paying them.
- Calculate and deduct CIS from each payment.
- Issue a payment and deduction statement to each subcontractor within 14 days of the tax month end.
- File a CIS monthly return (CIS300) with HMRC by the 19th of each month — even if no payments were made.
- Pay the deductions over to HMRC by the 22nd (electronic) or 19th (post).
Reclaiming overpaid CIS
Most subcontractors end up paying too much CIS over the year, because the 20% (or 30%) deduction takes no account of their personal allowance or business expenses. The overpayment is reconciled when you file your Self Assessment (sole traders) or Corporation Tax return (limited companies).
If you're a limited company, CIS deductions can be offset against your PAYE/NIC bill in-year through your monthly EPS submission, which helps cash flow significantly.
Need a hand with CIS?
We handle CIS verifications, monthly returns and reclaims for trade businesses across Yorkshire — and we'll usually find that money you didn't know you'd overpaid. Get in touch.
Frequently asked questions
- Do I need to register for CIS as a sole trader?
- If you do construction work as a subcontractor, yes — registering means you'll have 20% deducted instead of 30%, which is a meaningful difference. Register at gov.uk before your first payment.
- Does CIS apply to repairs at my own home?
- No. CIS only applies to work carried out for a contractor as part of their business. Domestic homeowners arranging work on their own home are not contractors for CIS purposes.
- Can I get gross payment status?
- Yes, if you pass HMRC's three tests: turnover (at least £30,000 of construction work in the last year, ignoring VAT and materials), business (operating from a UK bank account), and compliance (filed and paid all your taxes on time). It's worth applying — it removes the deduction entirely and improves cash flow.
Need help with your tax affairs?
We help SMEs, tradespeople, landlords and start-ups across Yorkshire stay on top of HMRC. Friendly, jargon-free and fixed-fee.
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