Rates and dates
- Registered subcontractor
- 20% deduction (GOV.UK: make deductions)
- Unregistered subcontractor
- 30% deduction (GOV.UK)
- Gross payment status
- No deduction (GOV.UK)
- Monthly return
- By the 19th after the end of the tax month (GOV.UK: monthly returns)
- Payment to HMRC
- By the 22nd, or the 19th by post (GOV.UK: pay deductions)
- Payment and deduction statements
- Within 14 days of the end of each tax month (GOV.UK)
Who is a contractor
HMRC's contractor guidance says a business must register as a contractor if it pays subcontractors for construction work. A business that does not do construction work must register if it has spent more than £3 million on construction in the 12 months since its first such payment. Sole traders, partnerships and limited companies can all be contractors, and registration comes before the first subcontractor is taken on.
CIS covers most construction work to buildings, including site preparation, decorating and refurbishment (GOV.UK: who is covered). Architecture and surveying, scaffolding hire with no labour, carpet fitting, delivering materials and non-construction work on site, such as running a canteen, are outside it. From 6 April 2026 payments to local authorities and public bodies are outside CIS (SI 2026/289, regulation 23A).
Running CIS each month
Register
A contractor registers by following the process for a new employer. HMRC's letter gives the employer PAYE reference and what is needed to start (GOV.UK: how to register).
Verify new subcontractors
Before paying a new subcontractor, verify them with HMRC using the contractor's UTR, accounts office reference and employer reference, and the subcontractor's UTR with their National Insurance number, company registration number or partnership details (GOV.UK: verify subcontractors). HMRC confirms the rate to use.
Work out the deduction
Deduct from the payment excluding VAT, materials the subcontractor paid for directly, consumable stores, fuel other than for travelling, plant hire for the job and manufacturing or prefabricating materials (GOV.UK).
Give statements
Give each subcontractor a payment and deduction statement within 14 days of the end of the tax month. For the tax month 6 May to 5 June, that is by 19 June (GOV.UK).
File the return and pay
File the monthly return by the 19th, confirming the subcontractors are not employees (GOV.UK: monthly returns), and pay the deductions with PAYE by the 22nd (GOV.UK)).
Verifying again
A subcontractor who has been included on a CIS return in the current tax year or either of the two previous tax years does not need to be verified again (GOV.UK: verify subcontractors). Anyone outside that period is verified as a new subcontractor.
Worked example
For example, a registered subcontractor invoices £5,000 plus VAT for a month, including £1,200 of materials they bought. The deduction is worked out on £5,000 less £1,200, which is £3,800. At 20% the deduction is £760, so the contractor pays £4,240 plus the VAT and pays £760 to HMRC with its PAYE. At the unregistered rate of 30% the deduction would be £1,140 (GOV.UK: rates).
Nil returns from 6 April 2026
The Income Tax (Construction Industry Scheme) (Amendment) Regulations 2026 came into force on 6 April 2026. A contractor that paid no subcontractors in a tax month must now file a nil return within 14 days of the end of that month, unless it told HMRC that it will make no payments for that tax month at least 14 days before the month started. HMRC's policy paper of 13 March 2026 describes the same change.
Late return penalties
A wrong employment status declaration on the return can bring a penalty of up to £3,000. Penalties can be appealed within 30 days, online or in writing (GOV.UK: monthly returns).
From 6 April 2026 HMRC can also cancel a subcontractor's gross payment status at once where the business knew or should have known it was part of fraudulent evasion, with a 5-year bar on reapplying and a penalty of 30% of the lost tax that can extend to directors (GOV.UK: tackling CIS fraud). See CIS for subcontractors.
Questions
Does the domestic reverse charge for VAT change the CIS deduction?
CIS deductions are worked out on the payment excluding VAT, so the deduction is the same. The VAT treatment is covered in the construction reverse charge.
In Accountin
In Accountin, CIS records each payment to a subcontractor, works out the deduction at the gross, registered or higher rate, prepares the CIS300 monthly return and prints the deduction statements. Filing the return with HMRC switches on once HMRC credentials are in place.
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