A CIS return is a mandatory monthly report that contractors in the UK construction industry must submit to HM Revenue & Customs (HMRC) detailing all payments made to their subcontractors. This is part of the Construction Industry Scheme (CIS), which aims to ensure that subcontractors’ tax and National Insurance contributions are collected at source. 

Who Files a CIS Return?

• Contractors are responsible for filing the monthly CIS return. A business is generally considered a contractor if it pays subcontractors for construction work, or if it spends more than £3 million on construction within a 12-month period, even if construction isn’t its main business.
• Subcontractors do not file the monthly CIS return. Instead, they use the information from the monthly statements provided by their contractors to complete their annual Self Assessment tax return, where they reconcile their tax and National Insurance liabilities and can claim any refunds for overpaid tax. 

How does the CIS work?

CIS applies to payments by a contractor to a ‘subcontractor’. In this case, the subcontractor is the person receiving payments for the provision of construction work. This includes most work in the construction industry. For example:

• Site preparation (i.e. laying foundations and providing access works)
• Demolition and dismantling
• Building work
• Alterations, repairs and decorating
• System installation for heating, lighting, power, water ventilation

How much are CIS tax deductions?

The flat rate percentage of tax withheld and paid to HMRC is dependent on whether the subcontractor is registered with the CIS. Contractors who take part in the CIS must deduct the following tax from their subcontractors:

• If the subcontractor is registered with the CIS, 20% of the invoice will be withheld and paid to HMRC• If the subcontractor is not registered for the CIS, 30% of the invoice will be withheld and paid to HMRC

The deductions made will contribute towards the subcontractor’s tax liabilities. If you’re working through a limited company as a CIS subcontractor, the deductions made can be offset against the company’s Corporation Tax liability.

Please be aware that if you are working through your own limited company, you must still take IR35 into consideration. This means that if you are a contractor or a subcontractor, if your assignment is affected by IR35 then this will override any CIS rules and regulations.

How do I register for the Contractor Industry Scheme?

To register for CIS as a subcontractor, head over to HMRC to sign up. You will need the following information:• National Insurance Number (NIN)

• Your Unique Taxpayer Reference number (UTR) or, if you are operating through a limited company, your business’ UTR number

• Your VAT registration number (if you are VAT registered)

• Your legal business name (you can also give a trading name if it’s different to your business name), if you have one.

Haven’t got a UTR number?

Sole trader

If you are a sole trader you will need to register as a new business for Self Assessment and, when prompted, choose ‘working as a subcontractor’. You can also call the CIS helpline to register. If you’re a sole trader and you already have a UTR number, you can register for CIS online. You’ll need the Government Gateway user ID and password you used when you registered for Self Assessment (or another government service).

Limited company

If you are a limited company or partnership, you can register for the CIS by filling in the online forms in the links provided above.

When to pay CIS tax?

CIS withholding tax is made to all payments received from a CIS contractor. This effectively serves as an advance payment towards your annual tax liability. However, most subcontractors are due a tax rebate at the end of the tax year, due to expenses being claimed back. If you want to find out more, take a look at our sister company Brian Alfred who specialise in tax rebates.

What doesn’t CIS apply to?

There are some exceptions where you don’t need to register as a CIS subcontractor, even when working in the construction industry. Certain jobs excluded from the CIS include:

• Cleaning the inside of buildings following construction work

• Architecture and surveying

• Scaffolding hire (without labour)

• Carpet fitting

• Making materials used in construction (including plant and machinery)

• Delivering materials

• Any other work on construction sites that wouldn’t be deemed as construction (i.e. running a canteen)