Last reviewed: October 2026
What is CIS?
The Construction Industry Scheme (CIS) requires contractors to deduct money from payments to subcontractors for construction work and pass it to HMRC. These deductions count as advance payments towards the subcontractor's tax and National Insurance.
Deduction rates
Registered subcontractors normally have 20% deducted from the labour element. Unregistered subcontractors have 30% deducted. Subcontractors who qualify for gross payment status receive payments without deduction.
Deductions apply to labour, not to the cost of materials the subcontractor supplies, VAT or certain other costs.
Contractor obligations
Contractors must register for CIS, verify subcontractors with HMRC, file a monthly return by the 19th of each month and pay deductions to HMRC — normally by the 22nd if paying electronically. Contractors must also give subcontractors payment and deduction statements.
Reclaiming overpaid CIS tax
Self-employed subcontractors include CIS deductions on their Self Assessment tax return. Where deductions exceed the tax and National Insurance due after allowable expenses, HMRC may repay the difference. Keep every CIS statement and records of business expenses.
Limited company subcontractors normally reclaim deductions through the company's payroll (EPS) process rather than Self Assessment.
Domestic reverse charge for VAT
VAT-registered businesses supplying certain construction services to other VAT-registered contractors may need to apply the domestic reverse charge, where the customer accounts for the VAT instead of the supplier.
Official sources
This guide is general information only, not advice for your circumstances. Rates and rules change — check the official sources or speak to us before acting.