What Is CIS? The Construction Industry Scheme Explained

CIS stands for the Construction Industry Scheme. It is an HMRC scheme that changes how subcontractors in construction are paid and taxed. If you work in construction, understanding CIS matters, because many subcontractors overpay tax under it and are owed a refund. This guide explains the basics.

What is the Construction Industry Scheme?

Under CIS, contractors deduct money from a subcontractor’s payments and pass it to HMRC as an advance payment towards the subcontractor’s tax and National Insurance. It applies to most construction work in the UK. The contractor is responsible for the deductions, and the subcontractor receives their pay with the tax already taken off.

CIS deduction rates

Contractors deduct 20 percent from registered subcontractors and 30 percent from those who are not registered for CIS. Some subcontractors with gross payment status are paid without deductions. Because these deductions are a flat rate and do not account for your Personal Allowance or expenses, many subcontractors pay too much and are due a refund.

What is a CIS return?

A CIS return is the monthly return that contractors must send to HMRC, reporting the payments they have made to subcontractors and the deductions taken. Subcontractors do not file CIS returns, but they do reclaim overpaid tax through their Self Assessment tax return.

Claiming back overpaid CIS tax

Because CIS deductions are taken before expenses and allowances, subcontractors are frequently owed money back at the end of the tax year. You reclaim it through Self Assessment, offsetting your tools, travel and other costs. See our CIS tax rebate guide, and check what you are owed with TaxPro on a no win, no fee basis.

Frequently asked questions

What does CIS mean?

CIS stands for the Construction Industry Scheme, an HMRC scheme where contractors deduct tax from subcontractors’ pay and send it to HMRC as an advance towards their tax bill.

What is the CIS deduction rate?

Contractors deduct 20 percent from registered subcontractors and 30 percent from unregistered ones. Some with gross payment status are paid with no deduction.

What is a CIS return?

A monthly return contractors file with HMRC reporting payments to subcontractors and deductions taken. Subcontractors reclaim overpaid tax through Self Assessment.

Why do CIS subcontractors get refunds?

Because deductions are taken at a flat rate before expenses and the Personal Allowance, so subcontractors often overpay and can claim the difference back.