Construction Industry Scheme (CIS)
Plain English. Practical detail. UK context.
The Construction Industry Scheme is the HMRC system under which contractors deduct money from certain subcontractor payments for construction work. The deductions are advance payments towards the subcontractor's tax and National Insurance, not a separate construction tax.
Last reviewed: (editorial review against the public sources listed below).
What it means in practice
Establish whether you are acting as a contractor, a subcontractor, or both. HMRC says contractors must register for the scheme. Subcontractors can work without registering, but higher deductions apply. Being a sole trader or using the word “subcontractor” on an invoice does not by itself settle whether CIS applies to a particular payment.
Check the actual work and business relationship. The scheme covers much construction work, including building, alterations, repairs, decorating and installation of heating, power, water and ventilation systems. HMRC also lists exceptions, such as certain professional services, materials manufacture and scaffolding hire without labour. Mixed contracts need careful checking rather than a guess based on the business name.
For homeowners
A private homeowner paying a tradesperson for work on their own home does not normally operate CIS simply because the work is construction. If your building contractor uses subcontractors, the contractor may have CIS responsibilities within that separate business relationship.
Do not deduct an arbitrary percentage from a domestic invoice because you have heard of CIS. Ask your accountant or HMRC if the project is connected with a property business or another commercial activity. The fact that a property looks like a house does not, on its own, establish the tax treatment of the work.
The headline deduction rates
HMRC's subcontractor overview states that the usual net payment deduction is 20% for registered subcontractors and 30% where a subcontractor is not registered. Gross payment status can allow payment without deductions when HMRC's conditions are met. These are scheme statuses, not rates that a customer can choose in order to negotiate a bill.
Do not apply a headline percentage to every number on an invoice without checking HMRC's calculation rules. The treatment of relevant materials, VAT and other components requires the official payment guidance. An invoice total and the amount subject to CIS deduction need not be identical.
Registration and employment status are different questions
CIS registration is not proof that a worker is self-employed. HMRC's subcontractor guidance says employees do not need to register for CIS and directs people to check employment status if unsure. A contractor should resolve the employment relationship rather than use CIS as a way to avoid considering payroll responsibilities.
Likewise, a business may need to register as both contractor and subcontractor. For example, receiving construction payments from another contractor and paying other subcontractors are different activities. Keep records that make those roles clear instead of combining all receipts and payments under a single label.
A useful record trail
For a subcontractor, the useful question is not simply “what landed in the bank?” Keep the original invoice, the contractor's deduction statement and the payment record. A deduction statement helps explain the difference between the invoiced work and the net cash received. Reconcile discrepancies while the job details are still available.
For a contractor, agree the commercial scope first, then follow HMRC's verification and reporting requirements. Record the basis for the deduction rather than relying on a verbal statement from someone on site. Where work or status is uncertain, get an accountant's help before making the payment calculation. This entry covers sourced basics, not personalised tax advice.
Practical checks
Keep the agreed work description, invoices and deduction statements together. Where you act as contractor, use HMRC's verification process and instructions rather than assuming a subcontractor's deduction status. Keep CIS calculations separate from a decision about employment status and from any VAT treatment.
Frequently asked questions
Is a CIS deduction my final tax bill?
No. HMRC describes the deductions as advance payments towards tax and National Insurance. Your final position depends on your business and tax affairs. Keep deduction records and obtain appropriate accounting advice rather than treating the withheld amount as the final calculation.
Does CIS registration prove someone is self-employed?
No. Employment status is a separate question. HMRC guidance should be used to establish the relationship rather than treating a CIS registration or an invoice heading as a decision on status.
Sources and further reading
Public sources and further reading. Sources checked: 8 November 2026. Consult the original for details and later changes.