Construction Industry Scheme Deductions

The Construction Industry Scheme (‘CIS’) is a special way of taxing self-employed individuals working for a contractor in the construction industry.

Contractors take deductions (i.e. money) out of your payments and pass it straight to HMRC. This works as an advance payment on your tax bill. At the end of the year, you include these amounts in your tax return to determine if there’s more tax to pay or if you’re due a refund. 

If you register for CIS, your contractor will deduct less from your payments. You can register online here: https://www.gov.uk/what-you-must-do-as-a-cis-subcontractor/how-to-register

Gross Payment Status

Subcontractors who do not want their employer to deduct tax at source can apply for Gross Payment Status. This means you’ll receive the payment gross of tax and must handle all the information in your tax return.

There are some criteria that you must meet to qualify:

• Tax & National Insurance must have been paid on time in previous years. 

• Businesses must do construction work or provide the labour for construction in the UK. 

• Business must run through a bank account.

• Turnover for the last 12 months, excluding VAT & cost of materials, must be at least £30,000 if you are a sole trader (different limits exist for limited companies and partnerships).