What is CIS (Construction Industry Scheme)?
CIS is a UK tax scheme where contractors deduct money from subcontractor payments and pass it to HMRC as advance tax payments.
The Construction Industry Scheme (CIS) is a UK tax deduction scheme that applies to payments from contractors to subcontractors in the construction industry. Under CIS, contractors must deduct money from payments and pass it to HMRC.
- **CIS deduction rates:**
- 0%: Gross Payment Status (no deductions)
- 20%: Registered and verified subcontractors
- 30%: Unregistered or unverified subcontractors
What work is covered by CIS? - Building and construction work - Repairs, decorating, alterations - Demolition and dismantling - Civil engineering work - Installation of heating, lighting, drainage
CIS invoice requirements: Your invoice must separately show: - Labour costs (subject to CIS deduction) - Materials costs (NOT subject to CIS) - Your UTR (Unique Taxpayer Reference) - The CIS deduction amount
Important for subcontractors: CIS deductions count toward your tax bill - you're not losing money, just paying tax early. You can offset deductions against your Self Assessment or claim a refund if you've overpaid.
Examples
A plasterer invoices £1,000 labour + £200 materials; contractor deducts 20% of £1,000 = £200
An electrician with Gross Payment Status receives full payment without deductions
An unverified subcontractor has 30% deducted from labour payments
Related Terms
Retention
Retention is a percentage of a construction payment withheld by the client until the project is satisfactorily completed and defects are rectified.
Invoice
An invoice is a commercial document issued by a seller to a buyer, listing the products or services provided and requesting payment.
Self-Billing
Self-billing is an arrangement where the buyer creates the invoice on behalf of the seller, based on goods received or services rendered.
Put This Into Practice
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