Construction Industry Scheme - CIS (Scotland)

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 as a subcontractor:

• gross; or

• 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).

You can apply for gross payment when you register for CIS, or at a later date. HMRC will check whether you meet the conditions needed to qualify for gross payment. HMRC will look at your business, its turnover and whether you have complied with certain HMRC filing or payment requirements, such as for VAT or self-assessment tax. For more information, see GOV.UK.

CIS payment under deduction

If you are registered for payment under deduction, the contractor takes off an amount before they pay you. The standard deduction rate is 20%. The contractor must then 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 may take more tax from you than you actually need to pay. If this is the case, you may be entitled to a tax rebate (refund) at the end of the tax 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.

Higher rate of deduction

Before the contractor can pay you for the first time, they must verify (check) that you are registered for CIS with HMRC. If you are not registered for CIS, HMRC will tell the contractor to deduct a higher rate of 30% from your pay.

To verify you with HMRC, the contractor will need the trading name that you gave HMRC when you registered for CIS, and your Unique Taxpayer Reference (UTR). Your UTR is a 10-digit number that HMRC sends you when you register for self assessment. For information about registering for CIS and self assessment, see GOV.UK.

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. If the domestic VAT reverse charge 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.

Other fact sheets that may help you

Income tax debt fact sheet

Tax allowances and amount fact sheet