What is the construction industry scheme?
Answered 17 March 2026
The Construction Industry Scheme (CIS)
HMRC Guidance / Practice
The Construction Industry Scheme (CIS) is the method by which HMRC records and traces payments made by a contractor to a subcontractor in the construction industry.
It is a statutory scheme that applies to payments made by contractors to subcontractors for construction operations carried out in the UK — it does not apply to construction work done outside the UK, even if the businesses involved are UK-resident.
Purpose
The CIS is aimed at preventing evasion of direct taxes by subcontractors working in the industry who are unknown to HMRC. The essence of the Scheme is that deductions are made at one of two prescribed rates from payments made to subcontractors engaged in construction operations, unless the subcontractor is registered gross under the Scheme.
Who it applies to
Businesses involved in construction operations are either contractors or subcontractors, and can be public bodies, companies, partnerships, or self-employed individuals. Key examples include:
- Contractors: construction businesses, property developers, foreign businesses carrying out UK construction operations, Government Departments and local authorities spending on average more than £1 million/year on construction, and non-construction businesses spending more than £1 million/year on construction operations. Non-construction businesses spending less than £1 million/year are not contractors and do not need to operate the Scheme.
- Subcontractors: any business or individual that has agreed to carry out construction operations for a contractor, either directly or by arranging for others to do so.
History
The original CIS was replaced by 'New CIS' on 6 April 2007.
Key Resources
Detailed guidance is available in the Construction Industry Scheme Reform Manual (CISR) and the guide for contractors and subcontractors, CIS 340.
Note: The CIS is also relevant to the VAT domestic reverse charge for building and construction services, which mirrors the CIS scope (with the exception of supplies of staff by employment businesses). However, the construction reverse charge is a separate measure and is not part of the CIS itself.
Citation sources
The Construction Industry Scheme (CIS) is the method by which HMRC records and traces payments made by a contractor to a subcontractor in the construction industry. The original Construction Industry Scheme was replaced by ‘New CIS’ on 6 April 2007. Information about the new scheme can be found at PAYE21040.
The scope of the domestic reverse charge for building and construction services, as defined in SI 2019/892 art. 5-7, is based on that of the Construction Industry Scheme (CIS). The CIS is aimed at preventing evasion of direct taxes by subcontractors working in the industry and who are unknown to HMRC. The essence of the Scheme is that deductions are made at one of two prescribed rates from payments made to subcontractors engaged in construction operations carried out within the United Kingdom, u
Specialist Personal Tax, PT International is responsible for operating the rules of the Construction Industry Scheme so far as they apply to companies that are not resident in the UK. Sub-contractors that are not companies are dealt with in the tax office that is responsible for the area in which the building site or construction project is located. The Construction Industry Scheme is a statutory scheme that applies to payments made by contractors to subcontractors for construction operations ca