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Updated: Feb 28, 2023

In the UK, construction companies are subject to the Construction Industry Scheme (CIS), a tax deduction programme. The programme was established to make sure that employees in the construction sector are making the proper tax and National Insurance payments. It's critical to comprehend your responsibilities under CIS if you work as a contractor or subcontractor in the building industry. In this blog, we'll go through the fundamentals of CIS and offer advice on how to adhere to its rules.

What does Construction Industry Scheme (CIS) stand for?

Payments paid to subcontractors in the construction business are eligible for a tax credit under the Construction Industry Scheme (CIS). In accordance with CIS, contractors must withhold tax from subcontractor payments and send this tax straight to HM Revenue and Customs (HMRC).

CIS is applicable to many different types of Construction Activities, such as:

  • setting up the site

  • modifications, fixes, and upkeep

  • Dismantling and destroying

  • engineering and construction work

  • Landscape and interior design

Who is Affected by CIS?

CIS is Applicable to Contractors and Sub-Contractors based in United Kingdom.

A subcontractor is a company that performs construction work for a contractor, whereas a contractor is described as a company that pays subcontractors for their services.

If you are a contractor, you must register with HMRC for CIS and confirm the tax status of subcontractors before transferring funds. If you are a subcontractor, you might need to register for CIS and give contractors the details of your tax registration.

Contractors and subcontractors must adhere to specific protocols in order to comply with CIS regulations, including:

  • Before hiring subcontractors, contractors must first register for the CIS programme with HMRC. You can register online, over the phone, or by mail.

  • Checking the Tax Status of Subcontractors: Before paying subcontractors, contractors must check their tax status. You can accomplish this by using HMRC's online verification tool or by requesting the tax registration information from subcontractors.

  • Contractors are required to withhold taxes from payments paid to subcontractors and submit these taxes to HMRC. Depending on the subcontractor's tax situation, 20% or 30% of the tax is subtracted.

  • Contractors are required to file monthly CIS forms to HMRC, which include information about the payments paid to subcontractors and the tax withheld.

  • Maintaining Correct Records: For a minimum of six years, contractors and subcontractors must maintain accurate records of all CIS payments and deductions.

Penalties for Non-Compliance

Penalties and fines may apply if CIS regulations are not followed. Contractors can be penalised up to £3,000 per subcontractor for failing to verify the tax status of subcontractors or register for CIS. Contractors can be penalised up to £3,000 per month for failing to withhold tax from subcontractor payments or to file monthly CIS returns.


In the UK, construction companies are subject to the Construction Industry Scheme (CIS), a tax deduction programme. Construction industry contractors and subcontractors are required to abide by CIS regulations, which include signing up for CIS, confirming the subcontractor's tax status, withholding tax from subcontractor payments, filing monthly CIS returns, and maintaining precise records.

Understanding your responsibilities and making sure you are fulfilling them are crucial since failing to comply with CIS regulations can result in penalties and fines.

How Punchhole can Help you?

Our expert team can help you get an register for CIS, File Monthly Returns to HMRC and maintain the records for your Construction Business along with the Bookkeeping and Year End Taxes

Call us today to Learn more about it...


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