The Construction Industry Scheme (CIS) is administered by HM Revenue & Customs (HMRC). It regulates how payments are made from contractors to subcontractors in the UK construction sector, ensuring tax compliance and proper reporting.
How CIS works
All contractors and subcontractors involved in construction work should register with CIS. The scheme applies to most construction-related activities, including site preparation, building, repairs, and demolition.
CIS roles explained
You must register as a CIS contractor if you:
- Pay subcontractors for construction work
- Operate as a business or organisation that has some involvement in the UK construction industry
You’re a CIS subcontractor if you:
- Are self-employed or a company
- Agree to carry out construction work for a contractor
If you act as both contractor and subcontractor, you must register for both roles.
Types of work covered by CIS
CIS applies to work carried out on:
- Permanent buildings
- Temporary structures (e.g. scaffolding)
- Civil engineering projects (e.g. roads, bridges)
Examples of covered activities:
- Site preparation
- Bricklaying, roofing, plastering
- Alterations and extensions
- Repairs and refurbishment
- Decorating
- Dismantling and demolition
Contractor responsibilities
Monthly returns
Contractors must submit monthly CIS returns to HMRC, detailing payments made to subcontractors. Returns can be filed online, and HMRC offers support for correcting errors.
Verifying subcontractors
Before making payments, contractors must verify subcontractors with HMRC to confirm:
- CIS registration status
- Applicable deduction rate
- Verification requires:
- Subcontractor’s name or business name
- Unique Taxpayer Reference (UTR)
- Company registration number or National Insurance number
- HMRC will provide a verification reference number and advise on the correct deduction rate:
- Gross payment – no deductions
- Standard rate (20%)
- Higher rate (30%) – if not registered or unverifiable
If a subcontractor has already been included in a previous CIS return, re-verification should be done periodically as HMRC should update their status.
If you would like to discuss this in more detail relating to your business, please feel free to book a free online meeting.
