The Construction Industry Scheme (CIS) is a set of special rules for tax and national insurance for those working in the construction industry. Businesses in the construction industry are known as ‘contractors’ and ‘subcontractors’. Under the scheme, contractors deduct money from a subcontractor’s payments and pass it to HMRC.
Contractors are defined as those who pay subcontractors, for construction work or spent an average of more than £1m a year on construction over a three-year period. Subcontractors do not have to register for the CIS but contractors must deduct 30% from their payments to unregistered subcontractors.
The alternative is to register as a CIS subcontractor, where a 20% deduction is taken or to apply for gross payment status where the contractor will not make any deductions and the subcontractor is responsible to pay all their tax and national insurance at the end of the tax year.
The CIS covers all construction work carried out in the UK, including jobs such as:
- site preparation
The UK includes UK territorial waters up to the 12-mile limit. Exceptions to the definition of construction work includes, professional work done by architects and surveyors, carpet fitting, scaffolding hire (with no labour) and work on construction sites that’s clearly not construction. The CIS does not apply to construction work carried on outside the UK.