Glossary · UK
What is Construction Industry Scheme (CIS)?
HMRC's scheme requiring contractors to deduct tax from payments to subcontractors in the construction industry at 20%, 30%, or 0%.
Full Definition
The Construction Industry Scheme (CIS) is a UK tax deduction scheme administered by HMRC that applies to payments made by contractors to subcontractors for construction work. Under CIS, contractors must register with HMRC and, before making payments, verify each subcontractor's status. Depending on the subcontractor's registration and compliance status, the contractor deducts tax at one of three rates from the labour element of the payment (excluding VAT and the cost of materials): 20% for registered subcontractors with standard CIS status; 30% for unregistered or unverified subcontractors; 0% (gross payment status) for subcontractors who meet HMRC's turnover and compliance tests. The deducted amounts are paid to HMRC monthly and count as advance payments towards the subcontractor's Income Tax or Corporation Tax liability. Subcontractors can offset CIS deductions suffered against their tax and NI liability on their Self Assessment return (individuals) or Corporation Tax return (companies), and can claim a refund if deductions exceed their total liability. CIS applies to construction operations including building, civil engineering, demolition, alterations, repairs, and installation of systems. It does not apply to professional services (architects, surveyors) or to businesses with a limited amount of construction spending.