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Construction Industry Scheme - CIS (Scotland)
This fact sheet covers Scotland. We also have a version for England & Wales if you need it.
This information sheet is for sole traders and partnerships who work in construction on the Construction Industry Scheme (CIS).
CIS sets out the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry. The scheme applies mainly to contractors and subcontractors in mainstream construction work.
Use this fact sheet to:
find out how you might be paid; and
see what sort of records you should keep.
Payments under CIS - gross or under deduction
Under CIS, there are two ways in which you might be paid.
Gross.
Payment under deduction.
CIS gross payments
If you are registered for gross payment, the contractor pays you in full without any deduction. You will need to pay tax and National Insurance contributions (NICs) on this amount later through your tax return to HM Revenue & Customs (HMRC).
CIS payment under deduction
If you are registered for payment under deduction, the contractor takes off an amount (currently 20%) before they pay you. The contractor must pay this amount to HMRC. You will still need to pay tax and NICs on your payments later through your tax return, but HMRC will take the amount that has already been paid by your contractor off your bill.
The 20% deduction will normally take off more tax you than you actually need to pay. This means you may be entitled to a tax rebate (refund) at the end of the year. To get this you must put your tax returns in on time and keep proper records.
To find out more about income tax, see our Income tax debt fact sheet.
Payment and deduction statements
When deductions are made, the contractor must give you a payment and deduction statement. This should be done within 14 days of the end of each tax month. The statement (sometimes called a ‘CIS voucher’) will show you how much has been deducted from your pay. Keep these statements.
Keeping records
If you are registered under the CIS scheme, you should still keep records to help you do your tax returns. You should keep things like:
cashbooks;
invoices;
mileage records;
bank statements;
receipts for purchases; and
payment and deduction statements (also known as 'CIS vouchers').
You can also claim certain expenses on your tax return. These include:
accountancy, legal and other professional fees;
car, van and travel expenses; and
stationery and other office costs (mobile, internet, email costs).
Using an accountant or bookkeeper
You may want to consider using an accountant or bookkeeper to do your tax returns. They will be able to offer advice about what you can include and what you can claim as expenses on your tax return.
VAT
If you are VAT registered and work under the CIS, you may be affected by the domestic VAT reverse charge. From 1 March 2021, where the new rules apply, a contractor must pay the VAT invoiced by a subcontractor directly to HMRC and not to the subcontractor.
For more information about the domestic VAT reverse charge and how it may affect you, see GOV.UK.