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Construction Industry Scheme (CIS)

Special tax rules exist for payments made in the Construction Industry to self employed sub contractors.

These rules require a contractor to:

  • Verify the tax status of subcontractors
  • Deduct tax from payments, depending on the subcontractors tax status
  • Report the amounts paid to subcontractors and deductions.

Contractor, in its simplest form, is any business in the Construction Industry paying someone else for Construction Services – so depending on the chain, a business can find itself being both a Sub Contractor and a Contractor.

Sub Contractor is another business providing Construction Service to the Contractor.

The scope of “Construction Services” is quite wide, and can catch services which, at first glance, you wouldn’t consider to be construction.

Sub Contractors, may:

  • Have Gross Payment Status – meaning no tax need be stopped by the Contractor.  There are strict conditions for getting Gross Payment Status
  • May be “registered” meaning the Contractor deducts 20% on payments (excluding materials and vat)
  • May be “un registered” meaning the Contractor deducts 30% on payments (excluding materials and vat)

Read more about the Construction Industry Scheme from HMRC