CIS explained: contractor, subcontractor, deductions and reclaims
The Construction Industry Scheme trips up more trades than anything else. Here's how it actually works, in plain English.
Read the guide →CIS explained: contractor, subcontractor, deductions and reclaims
If you work in construction, the Construction Industry Scheme (CIS) affects how you get paid and how you pay others. It's not complicated once someone explains it properly, so here goes.
Contractor or subcontractor?
Under CIS, a contractor pays subcontractors for construction work and has to make deductions from their payments. A subcontractor does the work and has those deductions taken off. Plenty of trades are both at once, paying subbies on one job while being a subbie on another.
The deductions
When a contractor pays a subcontractor, they deduct money from the labour element and pay it to HMRC as an advance towards the subbie's tax. The rate depends on whether the subcontractor is registered and verified. Materials are not subject to the deduction, only the labour.
Getting it back
If you're a subcontractor, those deductions aren't lost, they're a payment on account of your tax. At the year end they're set against what you owe, and very often there's a refund due. Done properly, that's money back in your pocket.
- Register with HMRC as a contractor, subcontractor, or both.
- Verify your subbies before you pay them so you apply the right rate.
- File your monthly CIS returns on time to avoid penalties.
- Consider applying for gross payment status so you hold onto your cash.
The takeaway: CIS is admin you can't avoid, but you can make it painless and make sure you reclaim everything you're owed. That's exactly what we do.
Want CIS handled and your deductions reclaimed?
Get your fixed quote →