The CIS is a set of special rules for tax and National Insurance (NI) for those working in the construction industry. Businesses in the construction industry are known as ‘contractors’ and ‘subcontractors’.

The scheme applies mainly to contractors and sub-contractors involved in construction however, certain businesses that are not in the business of construction but have a significant amount of annual spend may also count as contractors.

Who does CIS apply to?

Types of work and business structures covered by CIS

The CIS can apply to all types of businesses that work in the construction industry in the UK.

This includes:

  • self-employed individuals working as sole traders
  • partnerships
  • companies
  • limited liability partnerships (LLPs)

As well as traditional construction businesses like builders, the scheme can also apply to businesses like:

  • labour agencies and staff bureaux
  • gangmasters - or gang leaders
  • property developers

Definition of construction work

CIS covers construction operations carried out in the UK. The rules of the scheme define the types of work that are classed construction operations. But as a rule, the scheme includes almost any work that's done to a:

  • permanent building
  • temporary structure
  • civil engineering work or installation

Some examples of the types of construction work that are covered by the scheme include jobs like:

  • site preparation
  • general construction - bricklaying, roofing, plastering and so on
  • alterations and extensions
  • repairs and refurbishment
  • decorating
  • dismantling work
  • demolition

The scheme defines 'construction' as a term with a broad meaning that includes:

  • building things
  • making things
  • putting things together
  • assembling things

HMRC for example define assembling prefabricated units and site facilities off-site as construction work.

Who is a contractor?

A contractor is a business, or other concern, that pays subcontractors for construction work including:

  • Businesses that carry out construction operations;
  • Any property developers or speculative builders, erecting and altering buildings to make a profit;
  • Gang leaders organising labour for construction work.

Deemed contractors are those concerns that carry out construction work on their own premises or investment properties if they have spent more than £3 million on construction within the previous 12-month period. Ordinary householders having work done on their own properties or building a new house are not considered contractors.

Who is a subcontractor?

A subcontractor is a business that carries out construction work for a contractor. It can include an agency if a worker carries out construction operations under the terms of the contract they have with the agency. This is not the case if the agency merely introduces the worker to the contractor.

Subcontractors also need to register with HMRC and should keep HMRC informed of any changes in their business (including changes to the structure, address, business name, partners etc).

Monthly Returns

Contractors have to make a monthly return to HMRC:

  • confirming that the employment status of subcontractors has been considered
  • confirming that the verification process has been correctly dealt with
  • detailing payments made to all subcontractors and
  • detailing any deductions of tax made from those payments.

Contractors who have not paid any subcontractors in a particular month are required to submit a 'CIS nil return' or notify HMRC that no return is due.
All contractors are obliged to file monthly even if they are entitled to pay their PAYE quarterly.


The penalties for late submission of CIS contractor monthly returns are as follows:

Initial failure to meet due date
If a return is not received by HMRC by its due date of the 19th of the month, a penalty of £100 will be charged.

Return still outstanding two months after due date
If the return has still not been received by HMRC two months after its due date, a further penalty of £200 will be charged.

Return still outstanding six months after due date
If the return is still outstanding six months after its due date, a 'tax-geared' penalty becomes due. This penalty is the greater of 5% of any deductions shown on the outstanding return or £300.

Return still outstanding twelve months after due date
If the return is still outstanding twelve months after its due date, a second 'tax geared' penalty will become due based on the reason why HMRC determines the return is late.

VAT reverse charge

VAT reverse charge on certain building and construction services applies. The reverse charge is most relevant to sub-contractors and contractors carrying out supplies reported through the Construction Industry Scheme.