CIS Tax Returns

Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments and pass it to HM Revenue and Customs (HMRC). The deductions count as advance payments towards the subcontractor’s tax and National Insurance. The CIS scheme has defined rules for the payments for the subcontractors in the construction industry.

The CIS is an HMRC scheme that applies if you work for a contractor in the construction industry but not as an employee, so for example as a self-employed individual. The CIS rules mean that the contractor is usually obliged to withhold tax on its payments to you, at either 20% if you are ‘registered’ or 30% if you are not.

This is different from other self-employed individuals not within the construction industry, who normally receive their payments gross, which means no tax is deducted.

The scheme has two aims – to reduce levels of fraud and tax evasion in the construction industry and to help subcontractors spread their tax liabilities over the financial year. CIS applies to the payments made between a contractor and a subcontractor. Should the subcontractor pass three assessments – the business, turnover and compliance tests – and is registered with HMRC (HM Revenue and Customs), they’ll receive gross payments via the contractor. 

It is mandatory to file a Self-Assessment tax return to HM Revenue and Customs. SmartAWARE is helping people to file their Self-Assessment tax returns to claim the excess CIS tax that has been paid to HMRC.