Does CIS apply to you?
Yes, if you pay anyone for construction work.
CIS is the Construction Industry Scheme. It is a tax system where you deduct tax from payments to subcontractors and send it to HMRC.
It applies if you:
- Pay another person or company for building work
- Are a sole trader, partnership, or limited company
- Work in construction, plumbing, electrical, roofing, or any building trade
Even if you use a subcontractor just once a year, CIS applies to that payment.
Your role under CIS
There are two roles in CIS:
| If you... | You are a... | You must... |
|---|---|---|
| Pay others for construction work | Contractor | Register, verify, deduct, and report |
| Get paid for construction work | Subcontractor | Register to reduce your deduction rate |
Many builders are both. You are a contractor when you pay your labourer. You are a subcontractor when a main contractor pays you.
The 5 steps - your CIS checklist
Get these 5 things right and you will stay compliant.
Register as a contractor (once)
Before your first payment to a subcontractor, register with HMRC. This takes 10 minutes online and you only do it once.
Register as a CIS contractor
Who counts as a contractor and how to register with HMRC.
Register as a CIS contractor with HMRC (opens in a new tab)
The online registration service. You will need your Government Gateway account.
Verify each subcontractor (before you pay them)
Before paying any new subcontractor, check them with HMRC. This tells you how much tax to deduct.
You need their:
- Name (exactly as registered with HMRC)
- Unique Taxpayer Reference (UTR) - ask them for this
- National Insurance number (for individuals)
Verify a subcontractor's CIS status
How to verify online, what the results mean, and what to do if verification fails.
Deduct tax from the labour cost (when you pay)
Work out the deduction when you pay your subcontractor:
- Start with the invoice total (before VAT)
- Take off any materials the subcontractor paid for
- Apply the deduction rate (usually 20%) to what is left
Quick example
Subcontractor invoice: £1,000 labour + £300 materials = £1,300 total
- Deduction: £1,000 x 20% = £200
- Pay subcontractor: 1,000 - 200 + 300 = £1,100
- Pay HMRC: £200
Remember: Only deduct from labour. Materials pass straight through.
Give a statement (within 14 days of the tax month end)
For each tax month in which you paid a subcontractor under deduction, give them a written statement within 14 days of the end of that tax month (so by the 19th), showing:
- Your business name and PAYE reference
- Their name and UTR
- Gross amount, materials cost, and deduction amount
They need this to claim back tax from HMRC.
File your return and pay HMRC (by the 19th)
Each month, report all subcontractor payments to HMRC and pay over the deductions.
Submit your CIS monthly return
Step-by-step guide to filing your CIS300 return online, including nil returns if you made no payments.
CIS online service (opens in a new tab)
Verify subcontractors, file returns, and pay deductions - all in one place.
What if you miss a deadline?
Keep your records
Keep a record of the gross amount of each payment your subcontractors invoice, excluding VAT, and of every deduction you make. Where you made deductions, also keep the cost of materials each subcontractor invoiced, excluding VAT. Keep these records for at least 3 years after the end of the tax year they relate to. HMRC can fine you up to £3,000 if you cannot show them when asked.
Check they really are subcontractors
Registering for CIS does not make someone self-employed. Before you take someone on as a subcontractor, check whether you should employ them instead. Each monthly return asks you to declare that the people listed are not employees, and getting their status wrong on a return can cost a penalty of up to £3,000.
Check whether someone is an employee, worker or self-employed
The tests that decide employment status, and HMRC's online status checker.
HMRC helpline
If you are stuck, call the CIS helpline: 0300 200 3210 (Monday to Friday, 8am to 6pm).