Construction Industry Scheme (CIS)

If your business operates in the construction industry, it’s important to understand the Construction Industry Scheme (CIS). This scheme was introduced by HMRC to regulate the way payments are made to subcontractors, with the aim of ensuring that all workers are paid fairly and that taxes are collected efficiently.

What is the Construction Industry Scheme (CIS)?

The CIS is a tax deduction scheme for the construction industry which is designed to ensure that taxes are paid by subcontractors. Under this scheme, contractors are required to deduct a percentage of a subcontractor’s pay and pass it on to HMRC. The amount deducted depends on whether the subcontractor is registered with HMRC or not. If the subcontractor is registered with HMRC, they will be subject to a lower deduction rate of 20%. If they are not registered, the rate is 30%. However, if the subcontractor is exempt from CIS, they will not be subject to any deductions.

Who is covered by the Construction Industry Scheme?

The CIS covers all construction work carried out in the UK, including new construction, repairs, alterations, and demolition work. This includes work on buildings, roads, bridges, and other structures. The scheme covers contractors who are engaged in construction work and subcontractors who work for them. It’s important to note that the scheme also applies to limited companies and partnerships, not just sole traders.

What are the obligations for contractors under the Construction Industry Scheme?

If you’re a contractor in the construction industry, you have several obligations under the CIS. These include:

  • Registering with HMRC as a contractor
  • Verifying the status of your subcontractors with HMRC
  • Deducting the appropriate amount from your subcontractors’ pay
  • Paying the deducted amount to HMRC
  • Submitting monthly returns to HMRC

It’s important to note that failure to comply with these obligations can result in penalties and interest charges.

What are the obligations for subcontractors?

Subcontractors also have obligations under the CIS, and as with contractors, failure to comply with these can result in penalties and interest charges. These include:

  • Registering with HMRC as a subcontractor
  • Providing your Unique Taxpayer Reference (UTR) to their contractor
  • Checking that your contractor is registered with HMRC
  • Keeping accurate records of your income and expenses
  • Paying any taxes due to HMRC by the relevant deadlines


The Construction Industry Scheme is an important part of the UK construction industry, and it’s important for both contractors and subcontractors to meet their obligations under the scheme. Payroll Junction can help you by administering the CIS on your behalf, including making submissions to HMRC, submitting CIS reclaims, verifying subcontractors and providing subcontractor statements. By working together, we can ensure that the construction industry operates efficiently and fairly for everyone involved.

Need support with CIS? Contact Payroll Junction today.