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How does the Construction Industry Scheme (CIS) work?

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:

  • 20% for workers who have registered themselves as subcontractors with HMRC
  • 30% for those who have not.

Note that CIS only applies if you work in construction as a subcontractor and you have registered for CIS – here is how you do it.

Example of how CIS works:

Big Woodworks Ltd hires John Carpenter on their site as a subcontractor. Every month John is owed £1,500 pounds for his work.

  1. Every month the company pays £300 (20% of the £1,500) to HMRC as John’s taxes
  2. The company sends a CIS statement or payslip to John as proof
  3. The company pays the remaining £1,200 to John as payment for his work.

How do CIS refunds work?

In the example above, John’s annual income was £18,000 (£1,500 * 12).

John technically owes HMRC £2,370.20 (£1,230 Income tax + £1,015 national insurance).

However, throughout the year Big Woodworks Ltd paid £3,600 in taxes on John’s behalf!

John is now due a refund.

You can see the refunds due for other examples using our CIS rebate calculator.

If you’re due a CIS refund, you can claim it back by filing a Self Assessment tax return.

HMRC will pay back the tax owed, usually a few weeks after you have filed the tax return.

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