Construction Industry Scheme (CIS): What You Need to Know
The Construction Industry Scheme (CIS) sets out how contractors deduct tax from payments to subcontractors working in the UK construction industry. Understanding the rules can help your business avoid penalties, manage cash flow and stay compliant with HMRC.
What is CIS?
CIS applies to many construction activities, including building, alterations, repairs and demolition. Contractors generally deduct tax from subcontractor payments and pay those deductions to HMRC on the subcontractor’s behalf.
What are the CIS Deduction Rates?
The deduction rate depends on the subcontractor’s status:
20% – Registered subcontractors.
30% – Subcontractors who are not registered or cannot be verified as required.
0% – Subcontractors approved for Gross Payment Status.
Deductions are generally calculated after excluding VAT and qualifying material costs in accordance with HMRC rules. These deductions count towards the subcontractor’s tax liabilities; they are not necessarily the final tax bill.
Important HMRC Changes in 2026
From 6 April 2026, contractors must submit a monthly CIS return when required, even if no subcontractors were paid, unless they have appropriately notified HMRC of a period of inactivity.
HMRC also introduced an exemption from CIS for payments to qualifying local authorities and public bodies from 6 April 2026. Businesses should check the official guidance to determine whether this exemption applies to their payments.
Key CIS Deadlines
Contractors should remember:
19th of each month: Deadline for submitting the monthly CIS return and generally paying HMRC by post.
22nd of each month: Deadline for paying electronically.
These deadlines relate to the preceding CIS tax month. Late returns can result in penalties.
What Should Your Business Do?
Contractors should verify subcontractors, apply the correct deduction rates, submit returns on time and maintain accurate payment records. Subcontractors should keep their deduction statements and report CIS deductions through the appropriate tax process. Eligible deductions may be credited against tax liabilities, and a repayment may be due depending on the circumstances.
Key Takeaway
CIS compliance is essential for construction businesses. Review your registration,
deductions and monthly reporting arrangements to help prevent errors and
unnecessary penalties.
Need help with your CIS Payroll?
ASESA Solutions Ltd can assist with CIS, payroll, Personal Tax Returns, bookkeeping and accounting services.
📞 020 3983 9881
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