CIS
Acronym for Construction Industry Scheme — the HMRC regime under which contractors deduct tax from payments to construction subcontractors at 20% (registered) or 30% (unregistered), with the labour element only, and subbies reconcile via Self Assessment.
How it works
CIS covers most construction work, including site preparation, building, alterations, repairs, and demolition, but it applies specifically to payments contractors make to subcontractors — not to payments contractors make to their own employees, who are dealt with under normal PAYE instead. Contractors must register with HMRC for CIS, and subcontractors are strongly advised to register too, since registration is what determines whether 20% or 30% is deducted from their payments.
Deductions only apply to the labour element of a payment; materials genuinely purchased by the subcontractor for the job are excluded from the calculation, so contractors need to separate the two clearly on invoices and payment statements. Contractors must also submit monthly returns to HMRC confirming the payments and deductions made to each subcontractor, and file even in months with no payments if they remain registered.
For subcontractors, CIS deductions are simply an advance payment on account of the tax and National Insurance they will eventually owe, reconciled through their annual Self Assessment return. Because the flat CIS deduction rate often exceeds what a subcontractor actually owes once personal allowances and expenses are taken into account, many end up due a refund once their return is filed — see Construction Industry Scheme for the fuller mechanics.
Frequently asked questions
Who does CIS apply to?
It applies to contractors making payments to subcontractors for construction work, not to payments made to a contractor's own directly employed staff, who are handled through normal PAYE.
How do I know whether 20% or 30% will be deducted from my payments?
It depends on whether you are registered for CIS with HMRC as a subcontractor — registered subcontractors have 20% deducted, while unregistered subcontractors have 30% deducted.
Do I get the CIS deductions back?
Often yes. Because deductions are just an advance payment on account, many subcontractors are due a refund once they reconcile their actual tax liability through Self Assessment.
Related Terms
Construction Industry Scheme
HMRC scheme requiring contractors to deduct tax (20% for registered subcontractors, 30% for unregistered) from payments to subcontractors for construction work.
Gross Payment Status
HMRC status that allows a CIS subcontractor to be paid in full with no tax deduction.
Self Assessment
The system by which individuals report their own income, gains, and reliefs to HMRC each year through an online or paper tax return, rather than having tax collected automatically under PAYE.
Try the calculator
Use our free tool to see how cis affects your tax.