If you are working via the Construction Industry Scheme (CIS), you’ll be required to file a self assessment tax return after your first year of trading and subsequent years.
The Construction Industry Scheme is in place to reduce the potential for tax avoidance in the construction industry. Under the rules of the scheme, contractors must deduct money from the payments they make to subcontractors who carry out work for them and then pass this on to HMRC.
The contractor must also complete a CIS return each month, so that HMRC know who has been paid, how much, and what deductions were taken from them for tax.
Do I need to register for CIS?
Any contractor working in the construction industry must register for the Construction Industry Scheme (CIS) if they use subcontractors to carry out work for them. A subcontractor could be a self-employed individual or operate as a company, and doesn’t have to register for CIS, but deductions are taken from their payments at a higher rate if they don’t.
Contractors are responsible for checking whether or not the subcontractors they take on for construction work are verified with HMRC. It’s also their job to complete a CIS return each month, and to make CIS payments to HMRC.
Ensuring that subcontractors are verified with HMRC
Contractors need to verify the status of their subcontractors with HMRC before any work can start, so that they can confirm:
- The subcontractor’s tax status
- Whether or not the subcontractor is registered under the Construction Industry Scheme
Checking the status is an important step, because the contractor will use this to make deductions from the subcontractor’s payments at the correct rate.
Contractors will normally need to verify new subcontractors they work with, but should also re-verify any that they have used before if they haven’t been included in a monthly CIS return during the current or previous two tax years.
How do I verify a subcontractor for CIS?
As a contractor you can verify the status of subcontractors using HMRC’s free online CIS service. You can also use commercial CIS software – which is a requirement if you need to verify more than 50 subcontractors.
What information do I need to verify a subcontractor with HMRC?
Our table below explains what information contractors will need to have available to verify a subcontractor with HMRC.
| Contractor information | Subcontractor information |
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Providing the right information and confirming everything with HMRC helps make sure that contractors deduct the right amount when they pay their subcontractors. The contractor should also ensure that any subcontractors are self-employed, rather than an employee.
Once HMRC confirms the details, they will provide information on how to make a payment, and give the contractor a verification reference number. HMRC’s CIS enquiries page has contact details to help you get this information.
How much do I need to deduct from my subcontractors’ payments?
The rate at which you make CIS deductions from a subcontractor’s payment depends on whether or not they’re registered for CIS (which is why it’s so important to verify their status before starting work). There are three rates that contractors should use to make CIS deductions, which are then paid on to HMRC.
| 30% | If the subcontractor isn’t registered for CIS, or HMRC can’t verify them |
| 20% | For subcontractors who are registered for CIS |
| 0% | When the subcontractor has gross payment status and no deductions are made |
Completing a monthly CIS return
As a contractor you’ll need to submit a CIS return each month to tell HMRC about the subcontractors that you work with. Like with most things to do with HMRC, you’ll need to keep detailed financial records. These should show the amount that you pay to subcontractors, as well as the details of any deductions that you make.
What if I don’t use a subcontractor one month?
If you don’t use any subcontractors in a month then you won’t need to submit a CIS return for that period. You’ll still need to let HMRC know why you’re not submitting a return for that month though.
If you don’t expect to pay any subcontractors for the next few months, you can ask HMRC to temporarily mark your account as inactive. This is known as an inactivity request, and lasts for 6 months.
How do I submit a CIS return?
You can submit your CIS return to HMRC either directly through their website, or by using CIS software.
What information is on a CIS return?
The details you provide on your CIS return show HMRC which subcontractors you have paid, as well as the amount of pay and any deductions. This helps makes sure that everyone pays the right amount of tax. You’ll need the same information that you used to verify the subcontractor before you started working with them.
When do I need to submit my CIS return?
CIS returns must be submitted by the 19th of every month, with the details of the previous tax month’s activities. A tax month starts on the 6th of one month and ends on the 5th of the following month.
For example
If you make a CIS return for the tax month 6th April to 5th May, the deadline to submit it will be the 19th May.
Do I need to give subcontractors a CIS statement?
You only need to give subcontractors a CIS statement if you make deductions from their pay. It’s good practice to issue a statement regardless though, so everything is transparent and they have the details they need for their own tax return.
It’s usually helpful for subcontractors to submit their Self Assessment tax return early on. This is because the way deductions are made often results in tax overpayments, so submitting their return earlier means they get their tax refund sooner.
How do I make CIS payments to HMRC?
HMRC will set up your payment scheme when you register for CIS as a contractor, and you’ll use this to pay the deductions that you take from your subcontractors. As a contractor it’s your responsibility to pay the correct amount to HMRC by the 22nd of each month (or the 19th if you’re paying it by post).