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:

  • Verification of the subcontractors tax status
  • Deduction of tax from payments, depending on the subcontractors tax status
  • Reporting of amounts paid to subcontractors

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