Construction industry scheme

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The construction industry scheme (CIS) was devised to limit the amount of tax lost as a result of sub-contractors in the construction industry under-declaring or failing to notify their chargeability to UK tax.

The scheme operates to withhold tax at source at the point of making a contract payment (ie a payment made by a contractor under a construction contract), thereby reducing the risk of a subsequent default by the sub-contractor. However broadly speaking, if the sub-contractor can, among other matters, prove it has complied with its tax obligations it can apply to receive payments gross.

Measures to improve compliance with the CIS, and to tackle fraud by businesses operating within it, were announced at Budget 2025 and legislated for in the Finance Act 2026. Modelled on the VAT measures that restrict input tax recovery where a supplier knows or should have known that the supply was connected to the fraudulent evasion of VAT, these additional measures took effect on 6 April 2026, and broadly they:

  1. •

    provide for the immediate cancellation of gross payment status of a business

  2. •

    increase the waiting period before reapplying...

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