The CIS is a tax scheme used by HMRC to regulate tax payments within the construction industry. Under the scheme, contractors must deduct tax from payments made to subcontractors for construction work. The deducted amount is then paid directly to HMRC. The deductions can be claimed back by subcontractors when they file their tax returns.

If you’re a contractor, you must:

• Register with HMRC to operate under CIS.
• Verify all subcontractors to confirm their tax status.
• Deduct tax (20% for registered subcontractors or 30% for unregistered ones) from payments made to subcontractors.
• Pay the deducted tax to HMRC.
• Provide subcontractors with a CIS deduction statement showing how much tax has been deducted.

If you’re a subcontractor:

• You must register with HMRC to receive the correct tax deduction rate (20% or 30%).
• Tax will be deducted from your pay by contractors.
• You can claim back any overpaid tax when you submit your Self Assessment tax return.
• You only pay tax on your construction income. If you’re paid through CIS, the tax deducted is considered as prepaid tax.

• Registered subcontractors have a 20% tax deduction on their payments.
• Unregistered subcontractors will face a higher 30% tax deduction. To avoid this, it’s best to register with HMRC to reduce your tax burden.

Yes, if you’re a self-employed contractor and hire subcontractors, you must register for CIS with HMRC. If you don’t register and operate under CIS, you may be subject to penalties. You also need to verify subcontractors before making payments and ensure tax is deducted at the correct rate.

Yes, subcontractors can claim back any overpaid tax when they file their Self Assessment tax return. The tax deducted from your payments under CIS counts as prepaid tax, so if too much is taken, HMRC will refund the difference once your tax return is processed.