What is the CIS?
Definition of the CIS
CIS is short for Construction Industry Scheme. It's HMRC's way of collecting income tax from people who work in and around the building industry as subcontractors rather than employees.
Contractors in the construction industry often engage independent subcontractors to work on projects with them, rather than employing staff.
Historically a lot of construction industry workers, such as the navvies who built Britain's railways, were paid in cash and no tax was paid to HMRC on their earnings. The CIS aims to reduce this problem by taxing subcontractors' earnings as soon as they are paid out by the contractors.
How CIS works
A building firm has their tender for a new housing estate accepted. They source subcontract labour such as bricklayers, plumbers, and roofers.
As an example, the bricklayer submits an invoice to the building firm for the work he has done. The building firm pays him, but keeps back a certain proportion as tax under the CIS, and pays this over to HMRC.