Construction Industry Scheme Accountants

If you’re in the construction business, subcontracting to other suppliers can make your business model – and your accounting – a little more complex.

What is the Construction Industry Scheme (CIS)?

The Construction Industry Scheme (CIS) was set up by HMRC to ensure subcontractors cannot evade tax within the UK construction industry and to protect them from false employment. Under the scheme, registered contractors deduct money from subcontractors’ payments and pay it directly to HMRC as an advance contribution towards the subcontractor’s Income Tax and National Insurance.

So, who needs to register? HMRC requires you to register as a contractor with the CIS if:

  • You pay subcontractors to carry out construction work for you.

  • You have spent more than £3 million on construction work in a 12-month period since making your first payment (even if your business is not construction-based).

Your company status does not matter – you might be a sole trader, a partnership, or a limited company. Importantly, you must register before you employ your first subcontractor, not after.

Depending on your business, you may act both as a contractor and as a subcontractor. If so, you should register as both and follow the relevant processes in each case.

This is why many firms turn to accountants and CIS software to simplify CIS invoices and deduction statements.

What does CIS cover?

HMRC defines construction work as:

  • Permanent or temporary buildings and structures.

  • Civil engineering work such as roads and bridges.

For CIS purposes, this includes:

  • Site preparation (e.g. laying foundations, providing access).

  • Demolition and dismantling.

  • Building work.

  • Alterations, repairs, and decorating.

  • Installing systems for heating, lighting, power, water, or ventilation.

  • Cleaning the inside of buildings after construction work.

If you are entering the construction sector, CIS is likely to apply. There are exceptions, so it is always advisable to seek advice or review HMRC’s full guidance before registering.

CIS deduction rates

There are three deduction rates under CIS, though 20% is standard:

  • 20% for registered subcontractors.

  • 30% for unregistered subcontractors (a strong incentive to register).

  • 0% for subcontractors with gross payment status, meaning the contractor pays them in full and they are responsible for paying their own tax and National Insurance via Self Assessment.

Gross payment status

HMRC applies strict checks before granting gross payment status. You will need to show that:

  • You are fully tax compliant.

  • Your business is UK-based and operates in construction.

  • You have a UK business bank account.

There is also a turnover test. Ignoring VAT and raw materials, your turnover must be:

  • £30,000 or more for sole traders.

  • £30,000 per partner (or £100,000 for the whole partnership).

  • £30,000 per director (or £100,000 for the company as a whole).

If your company is controlled by five or fewer people, turnover must be at least £30,000 per person.

Faqs

Who counts as a contractor or subcontractor?

This depends on who employs whom. A contractor pays a subcontractor for their work. A business can act as both, in which case it must register in both capacities with HMRC.

  • Verify subcontractors with HMRC to establish the correct deduction rate.
  • Deduct the correct amount where required, make the net payment, record details, and issue deduction statements.
  • Submit monthly CIS returns to HMRC, detailing subcontractors, payments, and deductions.
  • Forward CIS deductions to HMRC each month, often via a separate holding account.

CIS applies a fixed deduction (usually 20%). PAYE uses tax codes, with deductions varying by income level. Employees on PAYE have employment rights such as holiday pay and sick leave, whereas CIS applies to the self-employed.

CIS only applies if you are self-employed. Employees should be on PAYE. Self-employed subcontractors must register with CIS, register as self-employed with HMRC, and file a Self Assessment return.

Yes – CIS applies to all types of business, including sole traders.

Yes – you may be able to reclaim tax if you have overpaid, for example due to expenses such as materials or tool hire. CIS also ignores the Personal Allowance (currently £12,570), so many subcontractors overpay and later receive a refund, subject to National Insurance deductions.

Yes – you may be able to reclaim tax if you have overpaid, for example due to expenses such as materials or tool hire. CIS also ignores the Personal Allowance (currently £12,570), so many subcontractors overpay and later receive a refund, subject to National Insurance deductions.

Why choose Crown Accountants as your CIS accountants?

At Crown Accountants, we specialise in supporting contractors and subcontractors across the construction sector. Our services include:

  • Monthly CIS returns – ensuring compliance and avoiding HMRC penalties.

  • CIS tax refund claims – helping subcontractors reclaim overpaid tax quickly and accurately.

From sole traders to growing construction firms, we provide expert advice and hands-on support to keep your accounts, payroll, and subcontractor records in order.

As trusted Chartered Accountants, we work to the highest professional standards and are committed to helping you build a stronger financial foundation.