[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"global":3,"entry:blog:cis-scheme-explained":324},{"id":4,"documentId":5,"siteName":6,"organizationSchema":7,"contactEmail":13,"contactPhones":48,"address":49,"currencyRates":50,"createdAt":70,"updatedAt":71,"publishedAt":72,"logoDark":49,"logoLight":49,"nav":73,"footer":257},1,"ded2oyx8g005xuue0dkk17wm","Accountaire",{"url":8,"logo":9,"name":6,"@type":10,"email":13,"sameAs":14,"address":16,"@context":21,"legalName":22,"telephone":23,"areaServed":24,"knowsAbout":36,"description":46,"foundingDate":47},"https:\u002F\u002Faccountaire.com","https:\u002F\u002Faccountaire.com\u002Flogo.png",[11,12],"Organization","AccountingService","hello@accountaire.com",[15],"https:\u002F\u002Fwww.linkedin.com\u002Fcompany\u002Faccountaire",{"@type":17,"streetAddress":18,"addressCountry":19,"addressLocality":20},"PostalAddress","5 Davis Road, G-8, Shimla Tower","PK","Lahore","https:\u002F\u002Fschema.org","Accountaire (SMC-Private) Limited","+1-925-219-6399",[25,28,30,32,34],{"name":26,"@type":27},"United Kingdom","Country",{"name":29,"@type":27},"United States",{"name":31,"@type":27},"United Arab Emirates",{"name":33,"@type":27},"Canada",{"name":35,"@type":27},"Australia",[37,38,39,40,41,42,43,44,45],"Bookkeeping","Cloud Accounting","VAT","Payroll","Management Accounts","CFO Advisory","Xero","QuickBooks Online","Making Tax Digital","Modern remote accounting for ambitious SMEs. 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modern remote finance team for ambitious businesses across the UK, US, UAE, Canada and Australia.","© Accountaire (SMC-Private) Limited. All rights reserved.",[261,265,269],{"id":262,"label":263,"href":264,"badge":49,"external":79},2006,"Privacy","\u002Flegal\u002Fprivacy",{"id":266,"label":267,"href":268,"badge":49,"external":79},2007,"Terms","\u002Flegal\u002Fterms",{"id":270,"label":271,"href":272,"badge":49,"external":79},2008,"DPA","\u002Flegal\u002Fdpa",[],[275,291,304],{"id":276,"title":78,"links":277},91,[278,280,282,284,286,288],{"id":279,"label":83,"href":84,"badge":49,"external":79},1991,{"id":281,"label":40,"href":87,"badge":49,"external":79},1992,{"id":283,"label":90,"href":91,"badge":49,"external":79},1993,{"id":285,"label":94,"href":95,"badge":49,"external":79},1994,{"id":287,"label":98,"href":99,"badge":49,"external":79},1995,{"id":289,"label":290,"href":103,"badge":49,"external":79},1996,"Catch-up",{"id":292,"title":240,"links":293},92,[294,296,298,300,302],{"id":295,"label":26,"href":244,"badge":49,"external":79},1997,{"id":297,"label":29,"href":247,"badge":49,"external":79},1998,{"id":299,"label":31,"href":250,"badge":49,"external":79},1999,{"id":301,"label":33,"href":253,"badge":49,"external":79},2000,{"id":303,"label":35,"href":256,"badge":49,"external":79},2001,{"id":305,"title":306,"links":307},93,"Company",[308,312,316,320],{"id":309,"label":310,"href":311,"badge":49,"external":79},2002,"About","\u002Fabout",{"id":313,"label":314,"href":315,"badge":49,"external":79},2003,"Pricing","\u002Fpricing",{"id":317,"label":318,"href":319,"badge":49,"external":79},2004,"Blog","\u002Fblog",{"id":321,"label":322,"href":323,"badge":49,"external":79},2005,"Contact","\u002Fcontact",{"id":325,"documentId":326,"title":327,"slug":328,"excerpt":329,"body":330,"category":331,"author":6,"readingMinutes":332,"publishedTime":333,"updatedTime":333,"createdAt":334,"updatedAt":334,"publishedAt":335,"seo":336,"blocks":344},477,"a4d0unrb0w777mteq6d977ly","The Construction Industry Scheme (CIS) explained.","cis-scheme-explained","The Construction Industry Scheme explained: CIS deduction rates, return deadlines, gross payment status, and how subcontractors reclaim what HMRC holds.","\u003Cp>The Construction Industry Scheme requires contractors to deduct tax from payments to subcontractors and pay it to HMRC. The deduction is 20 per cent for registered subcontractors, 30 per cent for unregistered ones, and nil for those holding gross payment status. Returns are due monthly by the 19th, and the deduction applies to labour, not materials.\u003C\u002Fp> \u003Ch2>What is the CIS scheme, and who does it cover?\u003C\u002Fh2> \u003Cp>CIS is a withholding regime, not a separate tax. HMRC set it up because construction runs on short engagements and mobile labour, which historically produced a large unpaid tax population. The scheme moves collection to the point of payment: the contractor withholds, HMRC holds the money, and the subcontractor either reclaims the excess or has it set against a liability. HMRC's overview sits at \u003Ca href=\"https:\u002F\u002Fwww.gov.uk\u002Fwhat-is-the-construction-industry-scheme\" rel=\"noopener\" target=\"_blank\">What is the Construction Industry Scheme\u003C\u002Fa>, and the full technical guide is \u003Ca href=\"https:\u002F\u002Fwww.gov.uk\u002Fgovernment\u002Fpublications\u002Fconstruction-industry-scheme-cis-340\" rel=\"noopener\" target=\"_blank\">CIS 340\u003C\u002Fa>.\u003C\u002Fp> \u003Cp>The scheme covers most construction operations on buildings and structures in the UK: site preparation, demolition, alterations, repairs, decorating, installing heating, lighting, power and water systems, and cleaning inside a building after construction work. It does not cover architecture and surveying, carpet fitting, delivering materials, making materials off site, or work on a site that is clearly not construction, such as running a canteen.\u003C\u002Fp> \u003Ch2>Who counts as a contractor and who counts as a subcontractor?\u003C\u002Fh2> \u003Cp>A contractor is anyone paying subcontractors for construction work. That obviously includes builders and developers, and it also catches deemed contractors: businesses outside construction whose spend on construction operations exceeds 3 million pounds in the previous 12 months. That test replaced the older averaging rule from 6 April 2021, so a retailer or a manufacturer that has been fitting out sites can find itself inside CIS without having thought of itself as a construction business.\u003C\u002Fp> \u003Cp>A subcontractor is anyone paid to carry out construction work for a contractor. A business can be both at once, and most established trades are: taking a main contract, then paying its own trades underneath. Both registrations are separate, and both sets of obligations run at the same time. Your obligations are set out at \u003Ca href=\"https:\u002F\u002Fwww.gov.uk\u002Fwhat-you-must-do-as-a-cis-contractor\" rel=\"noopener\" target=\"_blank\">what you must do as a CIS contractor\u003C\u002Fa> and \u003Ca href=\"https:\u002F\u002Fwww.gov.uk\u002Fwhat-you-must-do-as-a-cis-subcontractor\" rel=\"noopener\" target=\"_blank\">what you must do as a CIS subcontractor\u003C\u002Fa>.\u003C\u002Fp> \u003Ch2>What are the CIS deduction rates in 2026?\u003C\u002Fh2> \u003Cdiv class=\"compare-wrap\">\u003Ctable class=\"compare-table\">\u003Ccaption class=\"sr-only\">What are the CIS deduction rates in 2026\u003C\u002Fcaption> \u003Cthead>\u003Ctr>\u003Cth>Subcontractor status\u003C\u002Fth>\u003Cth>Deduction rate\u003C\u002Fth>\u003Cth>What triggers it\u003C\u002Fth>\u003C\u002Ftr>\u003C\u002Fthead> \u003Ctbody> \u003Ctr>\u003Ctd class=\"metric\">Registered for CIS\u003C\u002Ftd>\u003Ctd>20 per cent\u003C\u002Ftd>\u003Ctd>Verification with HMRC returns a match on name and UTR\u003C\u002Ftd>\u003C\u002Ftr> \u003Ctr>\u003Ctd class=\"metric\">Not registered\u003C\u002Ftd>\u003Ctd>30 per cent\u003C\u002Ftd>\u003Ctd>Verification fails, or the subcontractor has never registered\u003C\u002Ftd>\u003C\u002Ftr> \u003Ctr>\u003Ctd class=\"metric\">Gross payment status\u003C\u002Ftd>\u003Ctd>0 per cent\u003C\u002Ftd>\u003Ctd>Business, turnover and compliance tests all passed\u003C\u002Ftd>\u003C\u002Ftr> \u003C\u002Ftbody> \u003C\u002Ftable>\u003C\u002Fdiv> \u003Cp>The rate applies to the labour element only. Before deducting, strip out the direct cost of materials, consumable stores, plant hire, fuel other than for travelling, and manufacturing or prefabricating materials. Strip out VAT as well. The most expensive routine error in this scheme is deducting 20 per cent from a gross invoice that includes 40,000 pounds of materials, which overtaxes the subcontractor and leaves the contractor arguing about a payment it has already sent to HMRC.\u003C\u002Fp> \u003Cp>Verification is not optional and it is not a formality. You verify each new subcontractor with HMRC before the first payment, and HMRC returns the rate to use plus a verification number. Paying at 20 per cent because the subcontractor said they were registered, without verifying, is the failure that most commonly produces a determination for underdeducted tax.\u003C\u002Fp> \u003Ch2>When are CIS returns and payments due?\u003C\u002Fh2> \u003Cp>CIS runs on tax months ending on the 5th. The monthly return covering the tax month is due by the 19th of the following month, filed even in a month with no payments unless you have told HMRC the scheme is inactive. Payment of the deductions follows the PAYE calendar: the 22nd if paid electronically, the 19th if paid by post. HMRC's filing page is \u003Ca href=\"https:\u002F\u002Fwww.gov.uk\u002Fwhat-you-must-do-as-a-cis-contractor\u002Ffile-your-monthly-returns\" rel=\"noopener\" target=\"_blank\">file your monthly returns\u003C\u002Fa>.\u003C\u002Fp> \u003Ctable>\u003Ccaption class=\"sr-only\">When are CIS returns and payments due?\u003C\u002Fcaption> \u003Cthead>\u003Ctr>\u003Cth>How late the monthly return is\u003C\u002Fth>\u003Cth>Penalty\u003C\u002Fth>\u003C\u002Ftr>\u003C\u002Fthead> \u003Ctbody> \u003Ctr>\u003Ctd>1 day\u003C\u002Ftd>\u003Ctd>100 pounds\u003C\u002Ftd>\u003C\u002Ftr> \u003Ctr>\u003Ctd>2 months\u003C\u002Ftd>\u003Ctd>A further 200 pounds\u003C\u002Ftd>\u003C\u002Ftr> \u003Ctr>\u003Ctd>6 months\u003C\u002Ftd>\u003Ctd>A further 300 pounds, or 5 per cent of the deductions on the return if higher\u003C\u002Ftd>\u003C\u002Ftr> \u003Ctr>\u003Ctd>12 months\u003C\u002Ftd>\u003Ctd>A further 300 pounds, or 5 per cent of the deductions if higher, with larger penalties where information is deliberately withheld\u003C\u002Ftd>\u003C\u002Ftr> \u003C\u002Ftbody> \u003C\u002Ftable> \u003Cp>These stack per return, not per scheme. A contractor that stops filing for a year is looking at four separate penalty events on each of twelve returns, which is how a dormant scheme nobody remembered to close produces a five figure bill. Check the current penalty figures on the HMRC page before relying on them, and if a scheme is genuinely dormant, tell HMRC rather than leaving it open.\u003C\u002Fp> \u003Cp>You also owe every subcontractor a payment and deduction statement within 14 days of the end of the tax month. Subcontractors need it to reclaim, and the absence of statements is the first thing that makes a reclaim slow.\u003C\u002Fp> \u003Ch2>How do subcontractors get CIS deductions back?\u003C\u002Fh2> \u003Cp>It depends on the trading structure, and this is the point where the two most common structures diverge sharply.\u003C\u002Fp> \u003Cul> \u003Cli>\u003Cstrong>Sole traders and partnerships.\u003C\u002Fstrong> Deductions are credited against the income tax and Class 4 National Insurance on the Self-Assessment return, with any excess repaid after the return is filed. Deductions of 20 per cent on labour usually exceed the eventual liability, so most sole trader subcontractors are in an annual repayment position. Our \u003Ca href=\"\u002Fservices\u002Fself-assessment\">Self-Assessment filing service\u003C\u002Fa> handles the claim.\u003C\u002Fli> \u003Cli>\u003Cstrong>Limited companies.\u003C\u002Fstrong> Deductions are set against the company's PAYE, National Insurance, student loan and CIS liabilities each month by claiming them on the Employer Payment Summary. Any excess left at the end of the tax year is repaid or set against Corporation Tax. Companies that never file an EPS accumulate a credit they cannot use, and we see balances sitting unclaimed for two and three years.\u003C\u002Fli> \u003C\u002Ful> \u003Cp>The cash flow consequence is the reason construction businesses run out of money while profitable. A subcontractor invoicing 30,000 pounds of labour a month is 6,000 pounds a month lighter than the profit and loss account suggests. Our \u003Ca href=\"\u002Fblog\u002F13-week-cash-flow\">13 week cash flow template\u003C\u002Fa> is the tool we build first for anyone in that position, and our \u003Ca href=\"\u002Fservices\u002Fcloud-bookkeeping\">cloud bookkeeping service\u003C\u002Fa> keeps the deduction ledger reconciled so the reclaim is not a year-end archaeology project.\u003C\u002Fp> \u003Ch2>What is gross payment status and how do you get it?\u003C\u002Fh2> \u003Cp>Gross payment status means contractors pay you in full and you settle your own tax through the normal cycle. It is worth real money in working capital, and it is also a commercial signal: main contractors read it as evidence of a compliant business. HMRC sets out the route at \u003Ca href=\"https:\u002F\u002Fwww.gov.uk\u002Fwhat-you-must-do-as-a-cis-subcontractor\u002Fapply-for-gross-payment-status\" rel=\"noopener\" target=\"_blank\">apply for gross payment status\u003C\u002Fa>.\u003C\u002Fp> \u003Cp>There are three tests. The business test asks whether you carry out construction work in the UK and run the business largely through a bank account. The turnover test looks at construction turnover excluding VAT and materials over the previous 12 months, with different thresholds for sole traders, partnerships and companies, and an alternative aggregate figure for larger businesses. The compliance test asks whether you have filed and paid everything on time in the previous 12 months, and since 6 April 2024 VAT compliance forms part of it, with HMRC able to remove gross status for VAT failures.\u003C\u002Fp> \u003Cp>Status is reviewed annually and it can be withdrawn. A single late Corporation Tax payment can cost it, and losing it mid-year converts every future invoice into an 80 per cent payment overnight. If you hold gross status, treat filing deadlines as a covenant rather than an admin task.\u003C\u002Fp> \u003Ch2>How does the VAT domestic reverse charge interact with CIS?\u003C\u002Fh2> \u003Cp>Since 1 March 2021 the \u003Ca href=\"https:\u002F\u002Fwww.gov.uk\u002Fguidance\u002Fvat-domestic-reverse-charge-for-building-and-construction-services\" rel=\"noopener\" target=\"_blank\">VAT domestic reverse charge for building and construction services\u003C\u002Fa> applies to most CIS-reportable supplies between VAT-registered businesses. The supplier does not charge VAT. The customer accounts for both the output and the input VAT on its own return, and the invoice must say so.\u003C\u002Fp> \u003Cp>It stops at the end user. Where the customer is the end user, or an intermediary supplier connected to one, normal VAT applies and the customer should confirm its status in writing. Getting this wrong in either direction is expensive: charge VAT that should have been reverse charged and the customer cannot reclaim it, or reverse charge to an end user and you have underdeclared output tax.\u003C\u002Fp> \u003Cp>The second effect is on cash. Subcontractors who previously held customers' VAT for up to three months lost that float in 2021, and many moved to monthly VAT returns to sit in repayment more often. That is usually the right call, and it pairs with our \u003Ca href=\"\u002Fservices\u002Ftax-vat\">VAT and tax compliance service\u003C\u002Fa>. Contractors on the other side should read HMRC's \u003Ca href=\"https:\u002F\u002Fwww.gov.uk\u002Fhmrc-internal-manuals\u002Fvat-construction\" rel=\"noopener\" target=\"_blank\">VAT Construction manual\u003C\u002Fa> before assuming a project is zero rated.\u003C\u002Fp> \u003Ch2>What changed in CIS recently?\u003C\u002Fh2> \u003Cp>Two changes matter for 2026 planning. From 6 April 2024, VAT obligations were added to the gross payment status compliance test, which widened the ways a business can lose that status. From the same date, most payments made by landlords to tenants for construction work were taken out of CIS scope, which removed a genuine trap for property businesses that were funding tenant fit-outs and had no idea they were contractors. Both changes are reflected in \u003Ca href=\"https:\u002F\u002Fwww.gov.uk\u002Fgovernment\u002Fpublications\u002Fconstruction-industry-scheme-cis-340\" rel=\"noopener\" target=\"_blank\">CIS 340\u003C\u002Fa>.\u003C\u002Fp> \u003Cp>The status question underneath all of this has not gone away. CIS decides how a payment is taxed, not whether the person is self-employed. A labour-only operative working set hours under close supervision may be an employee, in which case PAYE applies and CIS never enters the picture. Where the work is supplied through the operative's own limited company, the off-payroll rules apply instead, which we cover in the \u003Ca href=\"\u002Fblog\u002Fir35-guide-2026\">IR35 guide for contractors\u003C\u002Fa>. Getting employment status wrong is a far larger exposure than getting a CIS rate wrong.\u003C\u002Fp> \u003Cp>One opinion, from cleaning up other people's schemes: almost every serious CIS problem we inherit started as a materials split nobody documented. The subcontractor invoiced a round number, the contractor guessed the labour element, and two years later HMRC asked for the evidence. Put the split on the invoice, every time. Our \u003Ca href=\"\u002Findustries\u002Fconstruction\">construction accountants\u003C\u002Fa> page sets out how we run the scheme end to end, and the \u003Ca href=\"\u002Fmarkets\u002Fuk\">UK accounting service\u003C\u002Fa> page covers the rest of the compliance calendar. Unfamiliar terms are defined in our \u003Ca href=\"\u002Fresources\u002Fglossary\">accounting and tax glossary\u003C\u002Fa>.\u003C\u002Fp> \u003Cdiv class=\"post-cta\"> \u003Ch3>Running a CIS scheme without a clean deduction ledger?\u003C\u002Fh3> \u003Cp>We verify subcontractors, file the monthly returns, issue the statements, and reclaim what is sitting with HMRC. Fixed monthly fee.\u003C\u002Fp> \u003Ca class=\"btn btn-primary\" href=\"\u002Fcontact\" style=\"align-self:flex-start;margin-top:6px;\">\u003Cspan data-cta-copy=\"\">Book a CIS compliance call\u003C\u002Fspan> →\u003C\u002Fa> \u003C\u002Fdiv>","UK · Tax",9,"2026-09-10T00:00:00.000Z","2026-09-11T00:58:50.897Z","2026-09-11T00:58:50.924Z",{"id":337,"metaTitle":338,"metaDescription":329,"keywords":339,"canonicalURL":340,"ogType":341,"ogLocale":342,"twitterCard":343,"noindex":79,"structuredData":49,"ogImage":49},4448,"Construction Industry Scheme (CIS) Explained","CIS scheme explained, Construction Industry Scheme, CIS deduction rates, gross payment status, CIS monthly return, VAT reverse charge construction","https:\u002F\u002Faccountaire.com\u002Fblog\u002Fcis-scheme-explained","article","en_GB","summary_large_image",[345],{"id":150,"heading":346,"items":347,"__component":376},"Frequently asked questions",[348,352,356,360,364,368,372],{"id":349,"question":350,"answer":351},12447,"Do I deduct CIS from materials?","Materials come out of the deduction, but only to the extent of what the subcontractor actually paid. Any mark-up added on top of materials counts as labour for CIS, and where the split on the invoice is not credible you are expected to apply your own judgement. If the figure turns out to be wrong, HMRC pursues the contractor.",{"id":353,"question":354,"answer":355},12448,"What happens if I pay a subcontractor without verifying them?","You are treated as having had to deduct at the correct rate, which for an unverified subcontractor is 30 per cent. HMRC can raise a determination for the underdeducted amount and charge interest and penalties, and the money is not recoverable from a subcontractor you have already paid in full.",{"id":357,"question":358,"answer":359},12449,"Do I need to file a CIS return in a month with no payments?","Yes, unless you have told HMRC the scheme is inactive. A nil return is still a return, and the 100 pound penalty applies from one day late. If you expect no payments for up to six months, notify HMRC that the scheme is inactive rather than filing nils you will eventually forget.",{"id":361,"question":362,"answer":363},12450,"Can a limited company subcontractor reclaim CIS deductions in-year?","Not without a PAYE scheme. The reclaim runs through the Employer Payment Summary, so a company that has never registered as an employer has no way to file one and waits until the year end instead. Where a scheme does exist, the EPS has to reach HMRC by the 19th of the following month to offset that period. Sending the figures on the monthly CIS return instead is where the claim most often goes astray.",{"id":365,"question":366,"answer":367},12451,"Does CIS apply to work outside the UK?","The scheme covers construction operations carried out in the UK, including UK territorial waters. Businesses based abroad that carry out construction work in the UK come within the scheme in the same way as UK businesses, and need to register before payments start.",{"id":369,"question":370,"answer":371},12452,"How is CIS different from IR35?","The sequence matters when both are in play. Settle the employment status question first, because a payment caught by the off-payroll rules is taxed as deemed employment and leaves CIS behind entirely. You never deduct under both. Contractors who run CIS on a personal service company invoice out of habit are the ones unwinding it later.",{"id":373,"question":374,"answer":375},12453,"Can I lose gross payment status?","Thirty days from the notice is the normal window to appeal, and twelve months is the usual wait before you can apply for the status again. Tell your main contractors yourself rather than letting them find out through a verification check.","blocks.faq"]