The Construction Industry Scheme (CIS) is an essential part of running a construction business in the UK — but it can often feel confusing, especially if you’re new to it.

Whether you’re a contractor or a subcontractor, understanding how CIS works is important to stay compliant and avoid unnecessary issues.

This guide explains CIS in simple terms, so you know what it means for your business and what you need to do.

What Is CIS?

The Construction Industry Scheme (CIS) is a set of rules from HMRC that applies to construction work.

Under CIS:

• Contractors must deduct money from subcontractors’ payments
• These deductions are passed to HMRC
• Subcontractors receive the remaining payment

The deductions count as advance payments towards the subcontractor’s tax and National Insurance.

Who Does CIS Apply To?

CIS applies to most construction work, including:

• Building and site work
• Repairs and maintenance
• Demolition
• Installation work (e.g. plumbing, electrical)

Contractors

Contractors are responsible for:

• Registering for CIS
• Verifying subcontractors
• Deducting the correct amount
• Submitting monthly CIS returns

Subcontractors

Subcontractors:

• Receive payments with deductions
• Can register with HMRC to reduce the deduction rate
• Claim back deductions against their tax bill

How Much Is Deducted?

CIS deductions depend on registration status:

• 20% — for registered subcontractors
• 30% — for unregistered subcontractors
• 0% — for subcontractors with gross payment status

Making sure you’re registered correctly can make a big difference to your cashflow.

How CIS Affects Your Cashflow

CIS can have a direct impact on how much money you receive and when.

For subcontractors:

• Deductions reduce your immediate income
• You may need to wait until your tax return to reclaim overpaid amounts

For contractors:

• You must manage deductions and payments accurately
• Errors can lead to penalties or delays

Keeping clear records is essential to avoid confusion and stay in control.

Common CIS Mistakes

Many businesses run into issues with CIS due to:

• Not verifying subcontractors correctly
• Applying the wrong deduction rate
• Missing monthly return deadlines
• Poor record keeping

These mistakes can lead to penalties and unnecessary stress.

How to Stay Compliant

To keep everything running smoothly:

• Register for CIS if required
• Verify subcontractors before paying them
• Keep accurate and up-to-date records
• Submit monthly returns on time

Having a structured system in place makes CIS much easier to manage.

CIS is a key part of working in construction, but it doesn’t have to be complicated.

Once you understand how it works and keep your records organised, it becomes much more manageable.

Staying on top of CIS helps you:

• Avoid penalties
• Keep payments accurate
• Stay compliant with HMRC

Need Help with CIS?

If you’re unsure whether your CIS is being handled correctly or want to make things simpler, we can help.

Learn about our CIS Returns Services

Contact us for construction bookkeeping services