At Thompson Wright, it’s our business to know your business.

We can help you comply with the Construction Industry Scheme (CIS)?

With the support of our specialist team, we’ll help your business thrive, grow, and succeed in the construction industry.

What is the Construction Industry Scheme (CIS)?

The Construction Industry Scheme (CIS) is a scheme set up by HMRC to ensure that the correct tax deductions are made from payments to subcontractors working in construction operations and civil engineering projects. Under this scheme, contractors are required to deduct tax and national insurance contributions from payments to subcontractors, based on their tax status, and pass these deductions on to HMRC as advance payments towards the subcontractor’s income tax and national insurance bill.

Who needs to register for CIS?

You must register as a contractor if you carry out construction work and pay subcontractors, or if you spend an average of more than £1 million a year on construction operations over any three-year period. This includes mainstream contractors such as construction companies and property developers, as well as deemed contractors like property investors who meet certain expenditure thresholds.

Subcontractors—including sole traders, limited companies, and self-employed individuals—can choose to register for CIS. Those who register benefit from a lower rate of tax deductions (usually 20%), whereas non-registered subcontractors face higher deductions (typically 30%).

How does CIS work in practice?

Before making payments, contractors must verify subcontractors with HMRC using their unique taxpayer reference and national insurance number. This verification confirms the subcontractor’s tax status and the rate of deduction to be applied. Contractors then provide payment and deduction statements to subcontractors each tax month, outlining the gross payment, materials costs, and tax deductions made.

Contractors submit monthly returns to HMRC, reporting all payments and deductions for the previous tax month. It’s important that payments to HMRC are made promptly to avoid any penalties.

Gross Payment Status and Tax Returns

Subcontractors who maintain good compliance can apply for gross payment status, which allows them to receive payments without any CIS deductions. However, they remain responsible for paying income tax and national insurance contributions through their annual self assessment tax return.

Subcontractors should keep thorough records of payment statements and expenses, including materials and fuel costs, to complete their tax returns accurately and claim any CIS refunds for overpaid tax.

The CIS scheme excludes VAT from deduction calculations for VAT-registered subcontractors, and contractors must be aware of the domestic VAT reverse charge rules that apply to construction services.

Employment status is a key factor under CIS; only self-employed subcontractors are covered, not employees who are subject to PAYE.

Get in touch

How does more time on your hands and less paperwork on your desk sound? Because that’s exactly what happens when you partner with Thompson Wright.

With years of experience working with contractors in the construction sector, we know what support you need. We’ll make sure you are always on top of your accounts and compliant with your duties, including taking care of your subcontractors’ tax payments.

At Thompson Wright, our team offers full CIS support, including help with registration, tax planning, submitting monthly returns, and managing HMRC compliance, ensuring your construction business runs smoothly within the CIS framework.

Get in touch today.