What Is the Construction Industry Scheme (CIS)? A Simple Guide for Contractors and Subcontractors

Introduction

If you work in construction, chances are you’ve heard of CIS – but knowing how it works and what’s expected of you can feel a bit overwhelming. Whether you’re a contractor hiring subcontractors, or a subcontractor working on site, understanding CIS helps you stay compliant and avoid unexpected tax issues.

This quick guide breaks down what the Construction Industry Scheme is, who it applies to, and what you need to do.

Why This Matters

CIS is HMRC’s way of collecting tax from subcontractors working in the construction industry. But it’s not just about ticking boxes. Get it right, and you stay on top of your taxes with fewer surprises. Get it wrong, and you could face penalties, payment delays, or even issues with your cash flow.

At Love Accountancy, we help contractors and subcontractors manage CIS with ease, so you can get back to building your business.

The Solution: What You Need to Know About CIS

1. What is CIS?

The Construction Industry Scheme (CIS) is a tax deduction scheme that applies to construction work in the UK. Under CIS, contractors deduct money from a subcontractor’s payments and pass it to HMRC. These deductions count as advance payments towards the subcontractor’s tax and National Insurance.

2. Who Needs to Register?

• Contractors: If you pay subcontractors for construction work, you must register as a contractor.

• Subcontractors: If you do construction work for a contractor, you can register as a subcontractor.

• Some businesses act as both.

3. What Counts as Construction Work?

CIS covers most types of construction activity, including:

• Site preparation

• Demolition and dismantling

• Building work (bricklaying, roofing, plastering, etc.)

• Repairs and decorating

• Installing systems like heating, lighting, power, or ventilation

4. What’s Not Included?

Some jobs fall outside CIS – such as architecture, surveying, scaffolding hire (with no labour), carpet fitting, and delivering materials.

5. How Deductions Work

Contractors deduct:

• 20% from registered subcontractors

• 30% from unregistered subcontractors

These are paid to HMRC, and subcontractors receive a monthly deduction statement showing what’s been taken.

6. Monthly Responsibilities for Contractors

• Verify your subcontractors with HMRC

• Deduct the correct amount

• File a monthly CIS return

• Pay deductions to HMRC by the 19th of each month (22nd if paying electronically)

7. What About Gross Payment Status?

Subcontractors can apply for gross payment status, meaning they receive full payment with no deductions – but this is only granted if certain turnover, compliance, and business criteria are met.

Expert Tips & Common Pitfalls

Register early – Late registration can delay payments or increase deduction rates.
Keep records – Maintain deduction statements, invoices, and proof of payments.
Don’t miss your return – Failing to file a monthly CIS return (even if no payments were made) can trigger automatic penalties.
Avoid incorrect deductions – Wrong rates or misclassified work can result in HMRC fines.

Call to Action

Need help keeping on top of your CIS obligations? Love Accountancy can register you, file your returns, and make sure you’re staying compliant – so you can get on with the job without tax stress.
Book a free consultation with our team today.

About Love Accountancy – Your go to Exeter Accountant

At Love Accountancy, we make things simpler for construction businesses and contractors – from CIS compliance to tax efficiency. Whether you’re a subcontractor dealing with deductions or a contractor managing monthly returns, we offer friendly, tech-driven support that helps you stay organised and focused. Looking for an accountant in Exeter who understands your industry? Let’s grow together.