What does CIS mean

The Construction Industry Scheme (CIS) describes the rules and regulations relating to how payments to subcontractors for construction work must be handled by contractors in the construction industry.

This CIS applies mainly to contractors and subcontractors in the construction work, however businesses or organisations whose core activity isn't construction but have a high annual spend on construction may also count as contractors and fall under the scheme as deemed contractors.

Contractor’s registration and obligations
If you're a CIS contractor including a deemed contractor, you'll need to register with HM Revenue & Customs (HMRC).

You'll also have to follow certain rules to make sure you pay your subcontractors within the scheme correctly. The things you'll need to do include the following
  • verifying your subcontractors with HMRC
  • paying your subcontractors in the right way after making deductions if necessary
  • paying over deductions to HMRC
  • giving subcontractors deduction statements
  • sending monthly returns to HMRC
  • keeping proper records

Paying subcontractors
There are several ways of paying subcontractors. These include
  • Gross payment without making any deductions
  • Net of deductions at the standard rate (20 per cent)
  • Net of deductions at the higher rate (30 per cent)

How to make deductions
When making payment to subcontractors, you need to deduct the following items to arrive at the correct amount.