What is the Construction Industry Scheme (CIS)?

03/22/2022

Self-employment

Construction Industry Scheme tax is due if you are a self-employed builder or contractor (CIS).

This page describes what the CIS is, how to register for it, and how the CIS affects your tax status. It also tells you what you need to know if you've applied for Self-employment Income Support Scheme (SEISS) grants.

What exactly is the Construction Industry Scheme (CIS)?

The Construction Business Plan (CIS) is an HMRC scheme that applies if you work for a contractor in the construction industry but not as an employee, such as a self-employed individual. According to the CIS rules, the contractor is normally required to withhold tax on its payments to you, at either 20% if you are 'registered' or 30% if you are not.

This is in contrast to other self-employed individuals outside of the construction business, who often receive their payments gross, meaning no tax is with held.

Not everyone in the construction sector works for themselves. If you work in the construction sector, you should think about your job status in the same manner that everyone else does.


It is critical to understand that even though a contractor withholds tax on payments made to you and you may receive paperwork that look similar to pay slips, you are not being considered as an employee and hence will not be entitled to any of the employment rights that come with being an employe.

More than merely building and civil engineering work, the CIS includes demolition, site clearance, repairs and decoration as well as the installation of a power system. The Construction Industry Scheme (CIS) paper from HMRC outlines all of the work that is covered.

It is important to note that if you provide construction industry type services directly to a homeowner (rather than a contractor), this does not fall under the CIS and the consumer will pay you gross on submission of your invoice.

The amount of tax that the contractor must deduct is determined on whether you register as a subcontractor under the CIS.

Is it true that all construction workers are required to pay tax under the CIS?

No, you should only pay CIS taxes if you are truly self-employed.

Contractors must determine whether their employees are employed or self-employed.

While most contractors would undoubtedly prefer to hire self-employed workers (since it means less cost/responsibilities/paperwork, etc. for them), self-employment is a matter of reality, not choice. On our website, you may learn more about determining job status.

When a person works exclusively for one contractor and does not have the risks of running a business, they are more likely to be an employee than a self-employed person - even if the work arrangement is only for a short time, they have an existing Unique Taxpayer Reference (UTR), or they provide their own small tools.

If the contractor considers you to be an employee, income tax (and National Insurance contributions) must be withheld at source by the contractor under the Pay As You Earn system. If you are an employee but are paid through an umbrella company or another intermediary, you should read out    professional advice.

How do I know if I need to join the Construction Industry Scheme (CIS)?

The Construction Industry Scheme (CIS) has two components: being a 'contractor' and being a 'subcontractor.'

If you hire other self-employed people to conduct construction work, you are a contractor and must register with the CIS. GOV.UK has more information on how to register for the CIS as a contractor.

As a self-employed worker, you are more likely to be hired by a contractor to conduct some construction work. This indicates that you are a subcontractor. If you are a subcontractor, you have the option of registering with the CIS.


GOV.UK outlines how to register as a subcontractor for the CIS and what information you will need to do so. Based on your current status as a sole trader, partnership or limited company and whether or not you've already registered as self-employed, there are numerous options for you to consider.

It is important to note that registration under the CIS is in addition to, not instead of, registering as self-employed for Self Assessment. This means that persons new to self-employment and the CIS must complete two different registrations. Both can, however, be done at the same time.

It is also feasible to work as both a contractor and a subcontractor. For example, if Ryan, an electrician, is hired by a local builder to do some work, his job would be covered by the CIS. If he subcontracted out some of his work to his electrician friend Jenny in order to get the project done faster, he must likewise register as a contractor and pay Jenny under the CIS.

By not registering with the CIS, you will be subject to a 30% tax deducted and withheld by your contractor for your work (but not any amounts you invoice for supplies, equipment, and labour are examples of direct costs. As a result, you will only be paid 70%, as demonstrated in the example below.

Oscar is an example.

Oscar works as a bricklayer on his own. Builders Ltd has engaged him to work on a construction site where they are constructing five new residences.

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