What is the Construction Industry Scheme (CIS)?

Definition of the Construction Industry Scheme (CIS)

The Construction Industry Scheme (CIS) is a scheme that HMRC uses to collect Income Tax from subcontractors who work in the construction industry.

How the CIS works

Rather than employing staff, contractors in the construction industry often engage independent subcontractors to work on projects with them.

As these subcontractors are self-employed and are not employees of the contractor, they cannot make Income Tax and National Insurance contributions through schemes such as PAYE. Instead, HMRC uses the Construction Industry Scheme to collect tax contributions from these subcontractors.

Under the scheme, contractors deduct money from the amount they pay a subcontractor and then pay that money to HMRC.

An update to the Construction Industry Scheme was made on 1st March 2021 which requires VAT-registered contractors to apply the domestic VAT reverse charge on qualifying services supplied by VAT-registered subcontractors.

You can learn more about the Construction Industry Scheme on HMRC’s website.

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