What is the Construction Industry Scheme (CIS)?
The Construction Industry Scheme (CIS) is the UK tax scheme under which contractors in construction deduct money from payments to subcontractors and pass it to HM Revenue and Customs as advance payments towards the subcontractors' tax and National Insurance. The deduction is 20% for registered subcontractors, 30% for unregistered ones, and nothing for those with gross payment status.
Also calledCISCIS deductionsCIS300gross payment status
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- Registered subcontractor
- 20% deduction
- Unregistered
- 30% deduction
- Monthly return due
- 19th of the month
How the Construction Industry Scheme works
Contractors register for CIS and verify each new subcontractor before paying them, which tells them the deduction rate to apply. Deductions are taken from the labour part of each payment, not from materials, and VAT is handled separately under the domestic reverse charge for construction services. Each tax month, which runs from the 6th to the 5th, the contractor files a monthly return by the 19th listing payments and deductions, pays the deductions over, and gives each subcontractor a payment and deduction statement within 14 days of the month end. Subcontractors offset the deductions against their own tax bill, or limited companies against their payroll liabilities. CIS applies to construction work in the UK whether the contractor is a builder or another business with high construction spending. Xero records CIS deductions on bills and invoices and prepares the monthly return.
Common questions
Who has to register for CIS?+
Contractors who pay subcontractors for construction work in the UK, including some businesses outside construction with high construction spending. Subcontractors register to have 20% rather than 30% deducted.
What is gross payment status?+
Status granted to subcontractors who meet turnover and compliance tests, which lets them be paid without CIS deductions and pay their tax themselves.
Are CIS deductions taken from materials?+
No. Deductions apply to the labour element of a payment. The cost of materials, and VAT, are excluded when calculating the deduction.
Accounting software that handles CIS
Part of Accountio’s accounting technology coverage · Glossary
