What Is the Construction Industry Scheme (CIS)?
If you work in the construction industry in the UK, you’ve likely heard of the Construction Industry Scheme (CIS). But what exactly is it, and how does it affect your taxes?
Whether you’re a contractor or subcontractor, understanding CIS is essential to staying compliant and managing your cash flow effectively. Without proper knowledge, it’s easy to overpay tax or face penalties from HM Revenue & Customs.
In this guide, we’ll explain what the Construction Industry Scheme is, how it works, and how Akount can help you manage CIS efficiently.
What Is the Construction Industry Scheme (CIS)?
The Construction Industry Scheme (CIS) is a tax system set up by HM Revenue & Customs to regulate payments within the construction industry.
Under CIS:
In simple terms: tax is deducted at source before subcontractors receive their payment.
Who Does CIS Apply To?
CIS applies to most construction work carried out in the UK, including:
Contractors
Contractors are businesses or individuals who:
Subcontractors
Subcontractors are individuals or businesses who:
Even if construction isn’t your main business, CIS may still apply.
CIS Deduction Rates
The amount deducted depends on whether the subcontractor is registered with HM Revenue & Customs.
Standard CIS Rates
20% – for registered subcontractors
30% – for unregistered subcontractors
0% – for subcontractors with gross payment status
What Is Gross Payment Status?
This allows subcontractors to:
Achieving gross status can significantly improve cash flow.
How CIS Works for Subcontractors
If you’re a subcontractor:
Example
Invoice: £1,000
CIS deduction (20%): £200
Amount received: £800
The £200 is paid to HMRC on your behalf.
How CIS Works for Contractors
If you’re a contractor, your responsibilities include:
Failure to comply can result in penalties and fines.
What Expenses Can CIS Subcontractors Claim?
Even though tax is deducted at source, subcontractors can still claim expenses to reduce their overall tax liability.
Common Allowable Expenses
These expenses reduce your taxable profit when submitting your tax return to HM Revenue & Customs.
Do CIS Workers Still Need to File a Tax Return?
Yes. Even though tax is deducted, subcontractors must still:
In many cases, subcontractors receive a tax refund because too much tax has been deducted.
Common CIS Mistakes to Avoid
CIS can be complex, and many contractors and subcontractors make costly mistakes:
These mistakes can lead to penalties or overpaying tax.
Benefits of Understanding CIS
When managed correctly, CIS can actually benefit subcontractors:
How Akount Can Help with CIS
Managing CIS correctly requires attention to detail and a solid understanding of HMRC rules.
Akount provides expert CIS accounting services for both contractors and subcontractors.
CIS Registration
We register you with HM Revenue & Customs and ensure everything is set up correctly.
Monthly CIS Returns
For contractors, we handle:
Tax Returns for Subcontractors
We prepare and submit your Self-Assessment tax return, ensuring:
Tax Efficiency Advice
We help you reduce your tax bill legally and improve cash flow.
Bookkeeping Support
We manage your finances using tools like Xero and QuickBooks.
Should You Operate as a Sole Trader or Limited Company Under CIS?
Both structures are possible under CIS.
Sole Trader
Limited Company
Choosing the right structure can significantly impact your tax position.
Final Thoughts
The Construction Industry Scheme (CIS) is a key part of how tax works in the UK construction sector.
Whether you’re a contractor or subcontractor, understanding your responsibilities is essential for:
Speak to Akount Today
If you work in construction and need help managing CIS, Akount is here to support you.
We provide expert CIS accounting services for contractors and subcontractors across the UK.
Contact Akount today and let us simplify CIS while helping you maximise your income.