Construction Industry Scheme (CIS)

The scheme sets out the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry and certain other businesses. Under the scheme, all payments made from contractors to subcontractors must take account of the subcontractor’s tax status as determined by HM Revenue & Customs. This may require the contractor to make a deduction, which they then pay to HMRC, from that part of the payment that does not represent the cost of materials incurred by the subcontractor.

The scheme covers all construction work carried out in the United Kingdom (UK), including jobs such as:

• site preparation
• alterations
• dismantling
• construction
• repairs
• decorating
• demolition.

The scheme covers all types of businesses and other concerns that work in the construction industry, including:

• companies
• partnerships
• self-employed individuals.

These businesses can be:

• contractors
• subcontractors
• contractors and subcontractors.

Under the scheme, the terms ‘contractor’ and ‘subcontractor’ have special meanings that cover more than is generally referred to as ‘Construction’.


A contractor is a business or other concern that pays subcontractors for construction work. Contractors may be construction companies and building firms, but may also be government departments, local authorities and many other businesses that are normally known in the industry as ‘clients’.

Some businesses or other concerns are counted as contractors if their average annual expenditure on construction operations over a period of three years is £1m or more. Private householders are not counted as contractors so are not covered by the scheme.


A subcontractor is a business that carries out construction work for a contractor.

Businesses that are contractors and subcontractors

Many businesses pay other businesses for construction work, but are themselves paid by other businesses too. When they are working as a contractor, they must follow the rules for contractors and when they are working as a subcontractor, they must follow the rules for subcontractors.

For a more detailed explanation of what is a contractor, get in touch.

What we can do for you

We at J D Jones & Co can assist you with :

• Registering as a contractor / subcontractor
• Verifying subcontractors
• Making deductions from payments
• Submitting monthly and annual Returns to HMRC