CIS & Construction
CIS done properly, not just filed on time.
The Construction Industry Scheme is genuinely technical, and most general accountants either avoid it or do it just well enough to get by. This is what it looks like handled by someone who treats it as a specialism — whether you’re a subcontractor reclaiming what you’re owed, or a growing construction business scaling past the point where it gets complicated.
CIS isn’t complicated because the rules are obscure. It’s complicated because getting it wrong is expensive, and the scheme has very little patience for “we’ll sort it at year-end.”
Verification has to happen before the first payment, not after. Deductions have to be calculated correctly and reported monthly, on time, every time. Subcontractors are routinely owed money back through over-deduction and don’t know it. None of this is hard to get right — it just requires someone who actually does it as a matter of course, not as an occasional add-on to a general practice.
Two starting points, same scheme
CIS looks different depending on which side of it you’re on.
Whether you’re doing the work or paying the people doing it, CIS touches your numbers constantly. The priorities are different — but the discipline underneath is the same.
Sole-trader subcontractors
Getting back what you’re owed
Most subcontractors have CIS deducted at the standard rate without anyone checking whether their actual tax position justifies it — which usually means a refund sitting unclaimed.
- Fuel cost tracked against actual mileage, not assumed — so a creeping cost-per-mile gets caught early.
- Vehicle costs — finance, maintenance, depreciation — allocated properly so each vehicle’s real contribution is visible.
- Customer rates checked against current cost to deliver, not against what was agreed two fuel-price cycles ago.
- Driver payroll including night-out allowances and overtime, processed accurately on a schedule drivers can rely on.
Growing limited companies
Scaling without the scheme becoming the bottleneck
Once a construction business is running its own subcontractors and growing past the point where one person can track it all in their head, CIS becomes an operational risk, not just a compliance task.
- Timesheets reconciled against client billing every week, so nothing slips between hours worked and hours invoiced.
- Weekly payroll run accurately and on time — non-negotiable in a business where people are paid weekly and notice instantly if it’s wrong.
- Margin tracked per client or per placement, not just across the business as a whole, so you know which relationships are actually worth keeping.
- Cash flow managed against the gap between paying staff weekly and collecting from clients on longer terms.
Plain English, on purpose
The terms that actually matter on a CIS job.
Nobody should need to become an HMRC manual reader to understand their own deductions. Here’s what the core terms actually mean.
Term
What it actually means
Verification
Before a contractor pays a subcontractor for the first time, HMRC has to confirm what rate of deduction applies to them — 0%, 20%, or 30%. Skipping this, or getting it wrong, is one of the most common and most avoidable CIS mistakes.
Standard vs higher rate
A registered subcontractor has 20% deducted from their labour (not materials). An unverified or unregistered one gets 30%. The difference is significant, and entirely avoidable with verification done properly.
Gross payment status
A subcontractor approved for gross status gets paid in full, with no CIS deducted, and handles their own tax directly. It has to be applied for and qualified for — turnover, compliance history, and business structure all matter — and it’s worth knowing whether it’s realistic for you.
Payment and deduction statements
The monthly proof a contractor has to give each subcontractor showing what was paid and what was deducted. Subcontractors need these to reconcile their own tax position — and to prove what they’re owed back if too much was taken.
CIS300 return
The monthly return a contractor files with HMRC reporting every payment made to subcontractors and every deduction taken. Late or wrong, and the penalties stack up fast — it’s one of HMRC’s less forgiving deadlines.
Where this overlaps with construction
CIS doesn’t stop at the building site.
Businesses moving materials, plant or aggregates for construction clients — haulage included — can fall under CIS without realising it applies to them. If that’s part of what your business does, it’s worth checking your status properly rather than assuming it doesn’t apply, because HMRC won’t take “I didn’t think it counted” as an answer after the fact.
As the business grows
What changes as a construction business scales.
TThe CIS obligations don’t change much. What needs to change is how reliably they’re handled as volume and subcontractor numbers grow.
Starting out
Getting the basics right
Registration, verification, and a clean process for the handful of subcontractors you’re working with — built right from the start, not bolted on later.
Scaling up
Volume starts to bite
More subcontractors, more sites, more payments — verification and monthly returns need a system behind them, not a spreadsheet someone remembers to update.
Built for high-volume businesses
See how this applies across other sectors.
High transaction volumes, sector-specific tax rules, and the compliance traps that catch growing businesses out. Each sector page spells out exactly what those are — and how we address them.