The Construction Industry Scheme (CIS) explained for people hiring builders

What CIS is

Under CIS, a contractor deducts money from payments to its subcontractors and passes it to HMRC. The deductions count as advance payments towards the subcontractor's tax and National Insurance.

Homeowners: CIS does not apply to you

HMRC is clear: private householders are not counted as contractors, so they are not covered by the scheme. If you are paying a builder to work on your own home, you do not register for CIS or make deductions — you simply pay the builder's invoice.

Businesses and developers: when you must register

You must register as a contractor if you pay subcontractors to do construction work. A business that does not do construction itself must also register if it has spent more than £3 million on construction in the 12 months since its first payment. This applies whether you are a sole trader, a partnership or a limited company.

Deductions: 20%, 30% or nothing

Before paying a new subcontractor, a contractor must verify them with HMRC. HMRC then confirms the rate:

• 20% — the subcontractor is registered for CIS and can be verified.
• 30% — the subcontractor is not registered, or cannot be verified.
• Nothing deducted — the subcontractor has gross payment status.

Monthly returns and payments

Contractors send HMRC a monthly return and give each subcontractor a statement of deductions. A tax month runs from the 6th to the 5th of the next month, and statements must be provided by the 19th. Deductions are paid to HMRC by the 22nd of the month, or the 19th if paying by post.

What counts as construction work

CIS covers most construction operations: building, altering, repairing, extending and demolishing buildings and structures, site preparation, installing systems such as heating and drainage, and painting and decorating. Professional work such as architects' and surveyors' services is not included.

What this means when you hire us

When a company works as the main contractor, it is responsible for CIS for its own subcontractors — verifying them, making deductions and filing returns. For a homeowner, that is all handled on the builder's side.