CIS (short for “the Construction Industry Scheme”) was set up by HMRC to collect income tax throughout the year from people working in the construction industry.
Construction companies deduct tax on behalf of their workers (subcontractors) and send the money to HMRC as tax payments:
Note that CIS applies only if you work in construction as a subcontractor (usually registered as self-employed).
Example: Big Woodworks Ltd hires John Carpenter on their site as a subcontractor. Every month John is owed £1,500 pounds for his work.
In the example above John’s annual income was £18,000 (£1,500 * 12).
This means John owes HMRC £2,370.20 (£1,230 Income tax + £1,015 national insurance).
However over the course of the year Big Woordworks Ltd paid £3,600 in taxes on John’s behalf!
This means John is due a refund.
You can see the refunds due for other examples using our CIS rebate calculator.
For the self employed, the CIS refunds are handled through the annual self assessment return.
HMRC will pay back the tax owed, normally a few weeks after the self assessment is filed.
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