If you work in the UK construction industry, the Construction Industry Scheme (CIS) affects how you get paid, how you report income, and how you stay compliant with HMRC. Whether you’re a contractor, subcontractor, or both, knowing how CIS works is crucial to avoiding penalties and keeping cash flow healthy.
Here’s everything you need to know.
What Is the Construction Industry Scheme (CIS)?
The CIS is a HMRC system that requires contractors to deduct tax at source from payments made to subcontractors for construction work.
Instead of subcontractors paying all their tax at year-end, contractors pay some of it directly to HMRC.
CIS applies to most construction-related activities including:
- Site preparation
- Demolition
- Repairs and maintenance
- Decorating
- Installation work
- Building extensions
- Civil engineering
If you’re paid for construction work, CIS almost certainly applies to you.
Who Needs to Register for CIS?
Contractors
You must register as a contractor if you:
- Pay subcontractors for construction work, or
- Spend £3 million or more on construction within 12 months (even if construction is not your main business)
Examples: property developers, housing associations, main contractors, large businesses.
Subcontractors
You must register if you are self-employed or a company working for a contractor in construction.
Registration affects:
✔ How much tax is deducted
✔ How quickly you get paid
✔ Whether you overpay tax
Clarus Accountancy Group handles CIS registration for both contractors and subcontractors.
How CIS Deductions Work
When a contractor pays a subcontractor, they must deduct tax at:
- 20% for registered subcontractors
- 30% for unregistered subcontractors
- 0% (gross payment status) for approved subcontractors
Deductions are passed directly to HMRC and count as advance tax payments.
What Is Gross Payment Status (GPS)?
Gross Payment Status lets subcontractors receive payments without any deductions.
To qualify, you must:
- Have a good tax compliance history
- Meet HMRC turnover tests
- Keep proper records
- File returns on time
Clarus can apply for GPS on your behalf and help maintain compliance.
Contractor Responsibilities Under CIS
If you are a contractor, you must:
✔ Verify subcontractors with HMRC
To check if they are registered and what deduction rate to apply.
✔ Deduct the correct tax from payments
Unless they have Gross Payment Status.
✔ Submit monthly CIS returns
Every month, even if no payments were made.
✔ Provide subcontractor deduction statements
As proof of tax deducted.
✔ Keep accurate CIS records
HMRC can fine you for inaccurate or missing data.
Clarus Accountancy Group manages all monthly CIS returns and compliance so you never miss deadlines.
Subcontractor Responsibilities Under CIS
If you are a subcontractor, you must:
- Keep records of CIS deductions
- File an annual Self-Assessment tax return
- Claim back overpaid tax (common due to 20–30% upfront deductions)
- Keep invoices and statements safe
Most subcontractors overpay tax — Clarus helps you claim this back quickly and correctly.
Common CIS Mistakes (And How to Avoid Them)
❌ Using the wrong deduction rate
❌ Missing monthly CIS returns
❌ Not verifying subcontractors
❌ Poor record keeping
❌ Incorrect treatment of materials
❌ Not applying for gross status when eligible
These mistakes can lead to HMRC penalties and cash flow issues.
Clarus ensures full compliance and accuracy.
Why CIS Is Important
CIS helps HMRC ensure tax is collected correctly within the construction industry. But for businesses, it can feel confusing — especially when balancing projects, labour, materials, and compliance.
That’s why having a trusted accountant makes all the difference.
How Clarus Accountancy Group Supports CIS Clients
We provide full CIS management for contractors and subcontractors across:
📍 Northamptonshire
📍 Bedfordshire
📍 Hertfordshire
📍 Buckinghamshire
Our services include:
✔ CIS registration
✔ Monthly CIS returns
✔ Subcontractor verification
✔ Deduction statement preparation
✔ Gross Payment Status applications
✔ Annual tax returns for subcontractors
✔ Advice on materials and labour splitting
✔ Cloud accounting setup for construction businesses
We make CIS simple, accurate, and stress-free — so you can focus on the job.
Need CIS Help? Speak to Clarus Today
Whether you’re a contractor managing teams or a subcontractor wanting to maximise take-home pay, Clarus Accountancy Group ensures you stay compliant and avoid penalties.
📞 Book your free CIS review today