CIS scheme

The CIS scheme (Construction Industry Scheme) is used by HMRC to collect Income Tax from subcontractors in the construction industry. 

You’re eligible to register for the scheme if you’re a self-employed construction worker. If you’re a full-time employee, the scheme does not apply to you. You can check with your company to confirm which bracket you fall under. 

What’s the point of the CIS Scheme?

In the past, self-employed construction workers (subcontractors) were paid in cash. But this meant it was hard for HMRC to track what everyone owed in tax. These difficulties led to HMRC introducing the CIS scheme 1971, allowing them to tax you on your subcontractor earnings as soon as you’re paid out by your contractor.

The types of jobs covered by CIS are:

• Decorators
• Demolition
• Dismantling
• Carpentry
• Alterations
• Repairs
• Dismantling
• Site preparation
• Alterations
• And more!

Why register for the CIS scheme?

If you’re registered for under the CIS scheme, you only have only 20% tax deducted from your salary. When you’re not registered, your contractor deducts 30% from your wages. Unless you earn more than £50,270 per year, this is more than you owe, so you’ll have to claim any overpayment back at the end of the tax year. You do this by filing a tax return.

This needs to be filed by 31st January the year after you worked. (Read more about the tax year dates for more info). 

Beyond the technical side of things, some contractors may not accept you to work on their site unless you’re registered with CIS, so it’s worth finding that out before inquiring about work. The contractor will verify your CIS scheme registration with HMRC before you start.

Who is exempt from the CIS scheme?

While most self-employed construction workers must register for the CIS scheme, certain groups are exempt. These include:

• Employees (as opposed to subcontractors) who are paid through PAYE
• Certain businesses working exclusively outside the construction industry (e.g. architects, quantity surveyors, structural engineers, etc.)
• Subcontractors working on contracts where CIS scheme deductions don’t apply (e.g., for private homeowners rather than contractors)

If you’re unsure whether you qualify for an exemption, check with HMRC or seek professional advice.

What is the CIS rebate?

The 20% deduction usually works out as more than you owe in tax, so subcontractors can claim back a CIS tax rebate from HMRC in the April of the following tax year. For most CIS construction workers, the average refund is about £2,000.