CIS ― contractors

Produced by Tolley
CIS ― contractors

The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • CIS ― contractors
  • Who is a contractor?
  • Sub-contractors
  • Construction operations
  • When is payment for construction operations ignored for the purposes of the CIS regime?
  • Multiple contractors
  • Overseas contractors
  • What are the contractor's responsibilities under the CIS?
  • Registering with HMRC for the CIS
  • CIS payments to sub-contractors
  • More...

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 sub-contractors who 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 sub-contractor. Although, if the sub-contractor can prove he has complied with his tax obligations he is 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.

Note that a consultation took place in the summer of 2014 to ‘improve the operation of the CIS for smaller businesses’, resulting in a Government commitment to make various changes to the regime, with some changes only coming into effect as from the start of the 2016/17 tax year. This guidance note makes clear where the regime has changed recently under the relevant headings.

Who is a contractor?

Only contractors are required to withhold tax on payments to sub-contractors, so who is classed as a contractor?

The first point to note is that a contractor is not solely restricted to a person carrying on a business which includes 'construction operations'.

Contractors also include businesses whose trade does not normally involve building or construction, but whose annual expenditure on 'construction operations' (averaged over three years) exceeds £1m (see below).

Local authorities or government bodies can also be regarded as contractors for the purposes of the scheme.

Homeowners who engage the services of sub-contractors to undertake building work on their own home are not regarded as a contractor for the purposes of the scheme. This means that the payments made to the sub-contractor for carrying out the work may be made gross.


A party to a contract relating to construction operations is a sub-contractor if he is

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