The Construction Industry Scheme (CIS) rules set out how tax is managed by contractors and subcontractors working in the UK construction sector. Contractors have several responsibilities under the rules, so in this article we’ll go over what you can expect from CIS.
Under Construction Industry Scheme (CIS) rules, contractors who hire subcontractors to work on construction jobs in the UK must be CIS registered. Once signed up, it’s the contractor’s responsibility to:
Verify their subcontractors’ status
Deduct money from their subcontractors’ payments
Submit monthly CIS reports
Send deductions to HMRC as an advance payment towards the subcontractor’s tax bill
Along with their name, the details you need from your subcontractor depend on what sort of business structure they operate as:
Sole trader: Their Unique Taxpayer Reference (UTR) number and National Insurance number
Limited company: The company name and registration number, and company UTR number
Partnership: The nominated partner’s details, and the partnership’s trading name and UTR number
Do I need to verify a subcontractor each time I pay them?
You won’t need to check a subcontractor’s CIS status every time you pay them, but you will need to verify them again if you haven’t included them on a CIS return in this tax year, or in the previous two tax years.
How much do I deduct from a subcontractor for CIS?
HMRC will tell you what rate you should use for a subcontractor’s deductions when you verify their CIS status. The table below explains which rates will normally be used.
Subcontractor CIS Status
Subcontractor is CIS registered
Subcontractor is not CIS registered
Gross payment status
When do I need to submit a CIS return?
As a contractor you’ll need to send a CIS return to HMRC every month and tell them about the payments and deductions you make for your subcontractors. Your CIS return can be submitted online or through your CIS software if you use it.
Do I need to tell subcontractors about information on a CIS return?
Yes, you’ll need to give your subcontractor a CIS statement each time you deduct money from their payments. This helps them complete their tax return, but it’s just as useful for you too – so any issues can be spotted and sorted out sooner!
Make sure you issue each subcontractor with their CIS statement within 14 days of the tax month ending. A tax month ends on the 5th of each month. For example, 6th May – 5th June.
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About The Author
I'm an AAT and ACA qualified Chartered Accountant with over 13 years experience working with businesses, contractors and sole traders. I also love watching live music, and quizzes!
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