The construction industry scheme (CIS) was devised to limit the amount of tax lost as a result of under-declarations or failures to notify chargeability by subcontractors, many of whom came to work in the UK for relatively short periods without paying any tax.

The scheme operates to withhold tax at source at the point of payment, thereby reducing the risk of a subsequent default by the subcontractor. Although, if the subcontractor can prove they have complied with their tax obligations then they are able to receive payments gross.

The scheme has undergone regular changes since its inception. The current regime came into effect on 6 April 2007.

For a summary of the CIS, see the CIS ― overview guidance note.

For an in-depth discussion of contractors and subcontractors, see the CIS ― contractors and CIS ― subcontractors guidance notes.

Finance Act 2021 introduced legislation to prevent non-compliant businesses from using the CIS to claim tax refunds to which they are not entitled. The measure allows HMRC to reduce or deny CIS set-off credit claimed on employer returns where the subcontractor cannot evidence the deductions and does not correct their return when asked