If you work as a contractor or subcontractor in the construction industry, you’ll need to be aware of something called the Construction Industry Scheme (CIS). The scheme allows for tax on a subcontractor’s pay to be deducted at source by a contractor in a supply chain and submitted to HMRC. These deductions count as advance payments towards the subcontractor’s tax and National Insurance Contributions.
If you’re a contractor, and making deductions from your subcontractors, you must register with HMRC for the scheme. As a subcontractor, you don’t have to register, but deductions may be made from your income at a higher rate if you aren’t registered. CIS does not apply to payments made to employees, who pay tax using HMRC’s Pay As You Earn (PAYE) system.
This guide will give you a better idea of what CIS is, and what you need to do to comply.