What is CIS?
The Construction Industry Scheme, or CIS for short, was set up to regulate the way subcontractors working in the construction industry pay tax. It means that contractors must deduct tax from their subcontractors’ invoices before paying them, and then send these deductions on to HMRC.
The contractor is also responsible for submitting monthly CIS return to tell HMRC about the payments that they make, and how much tax they’ve deducted on behalf of the subcontractor.
What about deductions?
The contractor is also responsible for submitting monthly CIS return to tell HMRC about the payments that they make, and how much tax they’ve deducted on behalf of the subcontractor.
The amount of tax they need to deduct depends on whether or not the subcontractor is registered for CIS. Subcontractors can reclaim any tax overpayments once they submit their Self Assessment tax return.
Deduction rates
If the subcontractor is registered for CIS, deductions are made at 20%
If the subcontractor is not registered for CIS, deductions are made at 30%
How often do I need to submit a CIS return?
You’ll need to submit CIS returns by the 19th of each month, covering the tax month which ended on the 5th day of the month. You won’t need to submit a CIS return if you don’t use any subcontractors one month, but you will need to let them know why you’re not submitting a return.
The CIS return tells HMRC of the payments you made to your subcontractors for that month, the amount of CIS tax you deducted, and how much you owe HMRC.
Do subcontractors need to submit CIS returns?
No, it’s a contractor’s responsibility to submit a monthly CIS return, but they should still tell you what information they have reported to HMRC. Subcontractors should submit a personal tax return known as Self Assessment to tell HMRC about their income.
It’s common for subcontractors to pay too much through CIS, so you might be able to claim a tax rebate once you submit your return.
