CIS for Subcontractors: What Every Builder Needs to Know

The Construction Industry Scheme (CIS) is one of the most misunderstood areas of UK tax, yet it affects hundreds of thousands of subcontractors across the country. If you work in construction — whether you are a bricklayer, plumber, electrician, roofer, or general labourer — understanding how CIS works is essential to protecting your income and staying compliant with HMRC.

How CIS Works in Practice

When a contractor hires you as a subcontractor, they must verify your tax status with HMRC before making any payments. Based on your registration status, the contractor will deduct tax from your payments at one of three rates:

• 20% (registered): The standard rate for subcontractors who are registered with CIS
• 30% (unregistered): If you are not registered with CIS, the contractor must deduct 30% from your payments
• 0% (gross payment status): If you qualify for gross payment status, no deductions are made at source

The deductions apply only to the labour element of your invoices. Materials that you have purchased and included in the invoice are not subject to CIS deductions, provided they are clearly itemised.

How to Register for CIS

Registering as a subcontractor with HMRC is straightforward and strongly recommended. The difference between a 20% deduction and a 30% deduction on every payment quickly adds up over the course of a year.

To register, you need:

1. Your National Insurance number
2. Your Unique Taxpayer Reference (UTR) — if you do not have one, you must register as self-employed first
3. Your legal name and current address

You can register by calling HMRC on 0300 200 3210 or through your accountant. Registration is free and there is no reason not to do it.

Gross Payment Status

Gross payment status means contractors pay you without making any CIS deductions. This significantly improves your cash flow, but HMRC has strict criteria. You must demonstrate:

• A UK-based construction business
• A turnover above the minimum threshold (£30,000 for sole traders)
• A clean compliance record — all tax returns filed and all tax paid on time

HMRC reviews gross payment status annually and can revoke it if your compliance record slips. Missing even one Self Assessment deadline can result in losing this status.

CIS Deduction Statements

Every time a contractor makes a payment and deducts CIS tax, they must provide you with a written statement showing:

• The contractor’s name and HMRC reference
• The gross amount of the payment
• The amount of any deduction
• The amount of any materials deducted before the CIS calculation
• The net payment you receive

Keep every statement. You need these when filing your Self Assessment return, as the CIS deductions are credited against your tax bill. Losing them means you could end up paying tax twice on the same income.

How to Claim CIS Refunds

If the CIS deductions taken from your income during the year exceed the tax and National Insurance you actually owe, HMRC will refund the difference. This is extremely common for subcontractors who have significant allowable expenses.

To claim your refund:

1. File your Self Assessment return for the tax year
2. Enter the total CIS deductions from your statements in the employment section
3. HMRC calculates your actual liability and issues a refund if appropriate

Refunds are typically processed within 4 to 12 weeks of filing. Many of our construction clients receive refunds of £2,000 to £5,000 per year, making it well worth the effort of keeping proper records and filing promptly.

Monthly CIS Returns for Contractors

If you also operate as a contractor (i.e. you hire other subcontractors), you have additional obligations:

• Register as a contractor with HMRC
• Verify every subcontractor before making payments
• Deduct CIS tax at the correct rate and pay it to HMRC by the 19th of each month (or 22nd if paying electronically)
• File a monthly CIS return by the 19th of each month, even if you made no payments
• Provide subcontractors with written deduction statements

Late filing of CIS returns attracts penalties starting at £100 per month, per return. These penalties add up very quickly if you fall behind.

Allowable Expenses for CIS Subcontractors

As a self-employed subcontractor, you can claim expenses to reduce your tax bill. Common deductible expenses include:

• Tools and equipment (or capital allowances for expensive items)
• Protective clothing and safety equipment
• Vehicle costs or mileage for travelling to sites
• Materials you have purchased for a job
• Accountancy fees
• Phone costs (business proportion)
• Public liability and professional indemnity insurance
• Training courses directly related to your trade

Get Expert Help With CIS

CIS compliance is an area where mistakes are costly and professional help pays for itself. At HS Global Accountancy, we work with builders, tradespeople, and construction businesses across the UK. From CIS registration and monthly returns to maximising your refund claims, we handle the paperwork so you can focus on the job. Visit our builders and tradespeople page to see how we can help.