What is Construction Industry Scheme (CIS)?

The Construction Industry Scheme (CIS) is an HMRC regime under which contractors deduct money from subcontractor payments and pass it to HMRC as advance income tax. The deduction rate is 20% for registered subcontractors and 30% for those not registered — only the labour element of an invoice is deductible, not materials. Subcontractors must register with HMRC to receive the lower 20% rate, and those with a strong compliance record and sufficient turnover can apply for gross payment status (no deduction). The scheme applies to most construction work including building, demolition, installation and site preparation.