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The Construction Industry Scheme (CIS) 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.
In the past, self-employed construction workers (subcontractors) were paid in cash. The difficulties in keeping track of this led HMRC to create the Construction Industry Scheme in 1971, allowing them to tax subcontractors’ earnings as soon as they were paid out by their contractors.
If you’re registered for the scheme, you will have only 20% tax deducted from your salary, rather than 30% that is deducted for those who aren’t registered.
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 £2,500.