The Construction Industry Scheme (CIS) is a UK tax scheme that governs how payments are made from contractors to subcontractors for construction work.
Under CIS, contractors must deduct tax from certain payments to subcontractors and pay these deductions directly to HM Revenue & Customs (HMRC). These deductions are treated as advance payments towards the subcontractor’s income tax liability.
CIS applies to construction work carried out in the UK and does not apply to employees, who are taxed separately under PAYE.
Before making a payment, a contractor must verify the subcontractor’s registration status with HMRC. The rate of deduction depends on that status:
20% (Standard Rate) – The subcontractor is registered under CIS.
30% (Higher Rate) – The subcontractor is not registered with HMRC.
Deductions are taken from the labour element of the invoice (excluding materials and VAT where applicable).
Contractors are responsible for verifying subcontractors, making the correct deductions, providing payment statements, and submitting returns to HMRC.
Subcontractors are responsible for registering with HMRC and ensuring their tax affairs are up to date.
Registering under CIS ensures subcontractors are taxed at the correct rate, improving cash flow.
Once you begin trading as a sole trader, you will need to register as self-employed online with HMRC. Once done, HMRC will provide you a Unique Tax Reference (UTR) number.
If you have already registered with HMRC as self-employed, you can find your UTR number on any letter or statements from HMRC
You will also need to register your UTR number with the CIS office to ensure you do not suffer a higher (30%) rate of deduction. To register for the CIS, you will need to click the button below.
After doing those two steps, you will be fully registered on the standard rate deduction of 20%.
