The Construction Industry Scheme governs tax deductions from certain payments for construction work. A business can be a contractor, a subcontractor or both.
The scope is wider than a business’s trading name. Review the work being carried out and the parties involved.
Check employment status first
CIS applies to relevant subcontract arrangements, not wages paid to employees. Registration under CIS does not prove that someone is self-employed for every engagement.
Consider the actual terms and working practices before deciding how a person should be paid.
Verify and make deductions
Contractors need to follow HMRC’s verification process where required and use the resulting payment status. A subcontractor may be paid gross or with deductions at the applicable rate.
Gross payment status has its own business, turnover and compliance conditions. It does not mean the income is free of tax.
See our CIS reference and the official contractor deduction guidance for current treatment.
Keep records and submit returns
Retain verification details, payment calculations and evidence of relevant materials and other excluded amounts. Provide deduction statements and include the required information in contractor returns.
Check what HMRC needs when no subcontractor payments are made. Reporting obligations should not simply be ignored during a quiet period.
Account for deductions suffered
For subcontractors, deductions are payments towards tax rather than a separate final tax. The process for claiming credit or repayment differs between individuals and companies.
Keep statements and reconcile them with receipts. Talk to us about organising your CIS records and reporting alongside our other accountancy services.