What Is Construction Industry Scheme (CIS) – A Complete Guide
- Adil Akhtar
- 23 hours ago
- 18 min read
Understanding the Construction Industry Scheme (CIS) – A Practical Guide for UK Taxpayers and Business Owners
Picture this: You’re staring at a payslip or contractor statement, and there’s a mysterious CIS deduction slapped right in the middle. What on earth is it? How does it impact your tax affairs? And what should you do next? If you’ve found yourself scratching your head about the Construction Industry Scheme — or CIS, as it’s known in tax circles — you’re in the right place.
Having navigated the complexities of CIS for over 18 years across dozens of client cases—from sole traders on small projects in Manchester to limited companies working on multimillion-pound contracts in London—this guide breaks down everything you need to know. We’ll walk through CIS basics, how it affects your tax position, the practical steps to stay compliant, and how recent 2025 changes might impact your calculations and payments.
What Is the Construction Industry Scheme (CIS) in the UK?
Put simply, CIS is a tax deduction scheme designed specifically for the construction industry to help HMRC collect tax more efficiently. It requires contractors to deduct money from payments to subcontractors and pay this directly to HMRC.
Under CIS:
● Contractors (typically larger construction firms or clients in construction) deduct tax at source on payments made to subcontractors.
● These deductions act as advance payments towards the subcontractor’s tax and National Insurance.
● Subcontractors then need to declare these payments and deductions on their tax returns, effectively reconciling tax owed or repaid.
From 2023 onward, CIS covers a wide range of construction-related work, including site preparation, alterations, repairs, decorations, and demolition.
Who Does CIS Affect?
● Contractors: Businesses or individuals paying subcontractors for construction work. They are responsible for registering with HMRC for CIS, verifying subcontractors, deducting tax appropriately, and reporting payments monthly.
● Subcontractors: Usually self-employed individuals or companies providing construction services to contractors. They have to register for CIS, receive payments
less CIS deductions unless verified for gross payment, and account for these deductions in their tax returns.
How Much Is Deducted Under CIS?
As of the 2025/26 tax year, the standard rates are:
Payment Status | Deduction Rate | Description |
Registered subcontractor (verified) | 20% | The contractor deducts 20% from payments made. |
Unregistered subcontractor | 30% | Higher deduction rate as a penalty for non-registration. |
Gross payment status | 0% | No deductions if subcontractor has gross payment status (approved by HMRC). |
This is not a tax itself but a withholding mechanism. The deducted amounts count toward the subcontractor’s overall income tax liability.
Why Is CIS Important for Taxpayers and Business Owners?
The real question many clients ask me is: How does CIS impact my overall tax position? Whether you’re a sole trader juggling PAYE income alongside subcontracting, or a business owner managing multiple supplier relationships, CIS deductions directly affect your cash flow and tax calculations.
A client from Sheffield, working as a subcontractor alongside a part-time job, recently found HMRC flagged an underpayment. Why? Because the CIS deductions made by contractors were not factored into her Self Assessment. CIS can cause HMRC confusion if not correctly reported—they see tax deductions but won’t know your total income until you submit your return.
Recognising these deductions and planning ahead will help prevent end-of-year tax shocks or cash flow issues. It’s a balancing act—treat CIS as a prepayment for tax, not simply an expense.
What Has Changed in CIS for 2025?
HMRC keeps CIS under regular review. Some recent practical updates affecting businesses include:
● More rigorous subcontractor verification rules: Contractors are advised to check verification promptly, avoiding wrongful higher deductions.
● Electronic reporting improvements: Monthly returns must be filed sooner, with stricter penalties for late or inaccurate submission.
● Clarifications on expenses and subcontractor status: Updates guide whether subcontractors can claim expenses against their income after CIS deductions, especially for incorporated businesses.
● CIS Rate and Allowance Freeze: In line with the broader tax framework, deductions rates remain unchanged but remember personal allowances for income tax remain frozen at £12,570 for 2025/26.
How Does CIS Interact with Other UK Taxes?
It’s easy to think CIS operates in isolation, but in practice:
● CIS deductions directly reduce the tax subcontractors pay on their Self Assessment returns.
● Any underpayment or overpayment might trigger adjustments in the PAYE tax code if the subcontractor is also employed.
● Subcontractors with multiple income streams—as I often see—need to carefully collate CIS deductions with other income types (rental income, dividends, or side hustles).
● Scottish and Welsh taxpayers should watch out: CIS deductions remain the same but your Scottish tax bands will influence your final tax liability differently (basic rate in Scotland starts at 19%, not 20%).
A Real-Life Scenario: Navigating CIS with Multiple Income Sources
Take Jane, a self-employed plasterer in Edinburgh, who also works part-time for a building company under PAYE. Her CIS deductions were accurately recorded by her contracting clients but not initially reported in her Self Assessment.
Because she didn’t consider these deductions extending her tax code adjustments, HMRC sent a tax demand after the end of year. After submitting a correction, she was able to reclaim overpaid tax, but only after months of back-and-forth and cash flow strain.
This is common when working multiple jobs or income sources. Having a clear method to reconcile CIS deductions alongside other income on your personal tax account or through professional advice can prevent this.
The Importance of Verification and Gross Payment Status
Be careful here, because I’ve seen clients trip up when their contractors incorrectly apply the 30% deduction due to missed verification. Registering with HMRC for verification is not just an administrative step—it can save you significant money by avoiding excessive tax deductions.
Getting gross payment status is even better. It means you receive payments with no CIS deductions and handle your tax payment yourself through Self Assessment.
Step-by-Step: How to Verify Your CIS Status and Check Deductions
Register as a subcontractor with HMRC if you’re carrying out construction work.
Provide your UTR and National Insurance number to contractors.
Contractors will check your verification status with HMRC before making deductions.
After payment, ask for monthly CIS statements from contractors showing deductions.
Log into your personal tax account (
) to confirm CIS deductions recorded by HMRC.
When completing your Self Assessment, show income inclusive of gross payments but deduct CIS from the tax payable.
Checklist for CIS Subcontractors to Avoid Common Errors
● Always confirm your correct CIS verification status with contractors.
● Keep detailed records of all payments and deductions.
● File your Self Assessment tax return accurately including all income and CIS deductions.
● Consider registering for gross payment status if you meet criteria.
● Check your tax code if you also have employment income to avoid double payments.
● Remember Scottish/Welsh tax differences if applicable.
● Keep an eye on changes to thresholds, such as the frozen personal allowance at £12,570 for 2025/26.
In conclusion, CIS can feel like a tax maze, especially when juggling multiple incomes or business roles. But understanding its practical operation, timely verification, and reconciling deductions in your tax returns will keep you ahead. If you’re a contractor, maintaining accurate records and submitting returns on time can prevent costly HMRC penalties.
Calculating Your Tax Position under the Construction Industry Scheme: Practical Steps and Real-Life Examples
Now, let’s think about your situation – if you’re self-employed subcontracting on a construction site, or a contractor managing payments to multiple subcontractors, how does CIS affect your final tax bill? What practical steps can you take to verify deductions and avoid costly errors?
Having worked with numerous clients across London, Manchester, and smaller towns, I’ve seen where the rubber meets the road: CIS withholding isn’t always straightforward in practice. Let’s cut through the jargon and focus on real figures, checks, and what you need to keep in mind for 2025/26.
How to Calculate Your Tax After CIS Deductions
CIS deductions are prepayments of your income tax and National Insurance. They don’t represent your full tax due but offset your final liability.
Basic calculation steps:
Total income from construction subcontracting: This is the gross amount paid by contractors before deductions.
Subtract allowable business expenses: Materials, tools, transport, professional fees—deductible costs related to your work.
Calculate taxable profit: Income minus expenses.
Account for CIS deductions: These are the amounts contractors have withheld and paid to HMRC on your behalf.
Include other taxable income: Salary, rental income, dividends if you have them.
Apply personal allowances and the relevant tax bands: For 2025/26, the personal allowance is £12,570, basic rate 20% up to £50,270, higher rate 40% above that.
Subtract CIS deductions from total tax due—HMRC will offset what’s already been withheld.
Practical Illustration: Jane, the Self-Employed Plasterer
Jane earned £45,000 gross from subcontracting during 2024/25. Her allowable expenses amounted to £7,000. She also has a part-time PAYE job earning £15,000.
● Gross subcontracting income: £45,000
● Expenses: £7,000
● Taxable subcontracting profit: £38,000
● Salary income: £15,000
● Total taxable income: £53,000
Jane’s contractor deducted 20% CIS on the gross payments, equating to £9,000 (20% of £45,000).
● Her personal allowance: £12,570 (frozen for 2025/26)
● Her basic rate band is £37,700 (£50,270 minus personal allowance)
Calculating tax:
● Income above personal allowance: £53,000 - £12,570 = £40,430
● Basic rate tax (20%) on first £37,700: £7,540
● Higher rate tax (40%) on remaining £2,730: £1,092
● Total income tax due: £8,632
Subtract CIS deductions (£9,000) from the tax due:
● £8,632 - £9,000 = -£368 (a surplus)
Jane is due a tax refund of £368 because HMRC withheld more CIS than her tax liability for the subcontracting income plus salary.
What about National Insurance Contributions (NICs)?
If subcontracting as self-employed, you’ll pay Class 2 and Class 4 NICs on profits.
2025/26 rates:
● Class 2: Flat rate £3.45 per week if profits exceed £12,570
● Class 4: 10.25% on profits between £12,570 and £50,270, and 3.25% above that
CIS deductions do not count towards NICs—they only reduce your income tax liability.
CIS and PAYE Interactions: Avoid Double Taxation
Be careful here, because I’ve seen clients trip up when they forget CIS deductions don’t automatically alter their PAYE tax code.
If you have both PAYE and CIS income, ensure your tax return includes all income and deductions. HMRC will calculate your total tax and issue any refund or further demand — but it’s your responsibility to submit accurate returns.
A contractor client I recently advised ran payroll for some employees whilst also subcontracting other services under CIS. They learned the importance of segregating payroll expenses and CIS subcontractor payments to avoid misreporting.
Checking Your CIS Deductions on HMRC’s Portal
You can verify monthly CIS deductions through your HMRC personal tax account or business account (www.gov.uk/personal-tax-account).
● Log in and navigate to the “Construction Industry Scheme” section.
● View monthly returns submitted by contractors.
● Confirm the amounts deducted match your records.
● If there’s a discrepancy, raise it with your contractors immediately to prevent tax errors or late filing penalties.
Handling Multiple Contractors and Income Streams
When working with multiple contractors, the deductions add up separately, but your overall tax position should be considered as one.
For example, if Bob in Leeds works for three different contractors on CIS, each deducting 20%, he should:
● Keep a spreadsheet or ledger of gross payments and deductions for each.
● Combine all income and expenses when completing his Self Assessment.
● Ensure the combined CIS deductions are correctly recorded on his return.
Don’t rely on contractors to sort this for you; multi-source income needs proactive management.
Dealing with Common CIS Pitfalls and Errors
1. Unregistered subcontractors getting 30% deducted: Avoid by registering early with HMRC.
2. Over-deductions due to missed verification: Occasionally, subcontractors get deducted at 30% despite being registered. Quick verification with HMRC is key.
3. Failing to declare CIS income: Leading to penalties. Keep regular records and update your annual tax return to include all CIS income and deductions.
4. Overlooking expenses: Some clients struggle to separate business expenses properly. Only legitimate expenses can be deducted from taxable income.
What If You’re a Contractor? How to Manage CIS Reporting and Payments
Contractors are responsible for:
● Registering for CIS with HMRC.
● Verifying subcontractors with HMRC before making payments.
● Deducting CIS tax correctly at 20% or 30% if not verified.
● Reporting all deductions monthly via the CIS return.
● Paying the deducted amounts to HMRC promptly.
Failing to comply can mean penalties or extra tax bills. Smaller contractors can sometimes find the process daunting, so many I’ve worked with outsource CIS compliance to accountants, but understanding the rules is still vital.
Special Cases: Emergency Tax and High-Income Child Benefit Charge (HICBC)
Occasionally, subcontractors may face emergency tax in their PAYE jobs, or the HICBC if combined household income exceeds £50,000.
● CIS deductions don’t affect these calculations directly but factor into your total income tax bill.
● Ensure when completing your Self Assessment you consolidate all income to avoid unexpected charges.
For example, Simon from Cardiff, who subcontracted under CIS and also received child benefit, was surprised by a higher tax bill. It turned out the combined income pushed him above the HICBC threshold.
Step-by-Step Checking Worksheet for CIS Subcontractors
Step | What to Do | Why It Matters |
1. Register for CIS | Contact HMRC to register as subcontractor | To avoid 30% deductions |
2. Keep detailed payment records | Document gross payments and CIS deductions monthly | For accurate tax returns |
3. Verify deductions on portal | Use HMRC personal tax account to check monthly CIS returns | To spot discrepancies early |
4. Collate expenses | Collect invoices, receipts for business expenses | To reduce taxable profit |
5. Complete Self Assessment | Include all income, expenses, and CIS deductions | To calculate final tax liability |
6. Claim refund if overpaid | Apply through Self Assessment if CIS exceeds your tax due | To get cash back timely |
7. Review other income streams | Include PAYE salary, dividends, rental or other income | To avoid tax surprises |
Advanced CIS Insights for Businesses and Contractors: Compliance, Tax Strategy, and Key Takeaways
None of us loves tax surprises, but here’s how to avoid them if you’re an incorporated subcontractor, contractor, or business owner involved in construction work subject to the Construction Industry Scheme (CIS). After years of advising clients from sole traders to companies with significant construction contracts, I’ve seen the points where CIS complexity can cause pitfalls—and how getting it right can improve cash flow and reduce tax risks.
This final part deep dives into advanced CIS scenarios, compliance tips for contractors, how CIS affects incorporated businesses, and an expert summary of must-know points.
CIS for Incorporated Businesses: What Directors and Companies Should Know
If you run a limited company providing construction services, CIS rules apply differently compared to being self-employed.
● CIS payments received by your company are gross, with no deductions at source. Contractors must pay you the full invoice amount.
● Your company then accounts for corporation tax on profits after deducting legitimate business expenses.
● Directors must ensure accurate invoicing and retain proof of contracts to show it’s a genuine construction service.
● Employees within the company are subject to regular PAYE and National Insurance, separate from CIS rules.
● CSCS card (Construction Skills Certification Scheme) verification or similar industry credentials may be necessary to confirm eligibility.
In one case, a small London-based firm missed reporting subcontracting income properly and delayed corporation tax filings. We helped them streamline record-keeping, avoiding late filing penalties and securing legitimate expense claims.
Contractor Obligations and Reporting Requirements
For contractors, compliance means:
● Registering for CIS with HMRC promptly once construction payments start.
● Verifying all subcontractors before payments to avoid 30% deductions and potential penalties.
● Deducting the right CIS amount on each payment, whether 20% standard or 30% unregistered.
● Submitting monthly CIS returns by the 19th of each month following payment month.
● Paying deducted tax on time to HMRC; late payments can attract interest and fines.
A Midlands-based contractor I worked with faced a significant penalty due to late monthly returns. We introduced a tracking system and accounting software integration to manage CIS returns more efficiently.
How CIS Affects Expense Claims and Tax Reliefs
As a subcontractor or company, you might wonder how CIS deductions interact with your expense claims.
● CIS deductions reduce your taxable income tax, but they do not affect allowable business expenses.
● Always keep receipts and records for expenses such as materials, vehicle use, insurance, and training costs.
● For limited companies, wages paid to employees (including directors) are deductible from profits.
● If you pay subcontractors yourself, ensure you apply CIS rules when making payments, or risk penalties.
Practical Tip: Spotting Underpayments and Getting Refunds
Many subcontractors only realise months or years later that they have overpaid tax because CIS deductions weren’t accounted for properly.
Take Sarah, a sole trader in Birmingham, who discovered she hadn’t included CIS deductions from previous contractors when filing her tax returns over three years. After amending her returns, she secured a substantial refund from HMRC.
You can review your past CIS deductions and claim a refund for up to four years. Use your personal tax account to check all deductions recorded.
Managing Unique CIS Scenarios
Emergency Tax: Subcontractors who start new PAYE jobs alongside CIS income might face emergency tax codes, causing temporary over-taxation.
High-Income Child Benefit Charge (HICBC): If your combined income (including CIS profits) exceeds £50,000, child benefit may be clawed back through your Self Assessment.
Scottish and Welsh Tax Differences: Remember, while CIS deductions remain consistent, Scottish taxpayers must apply different tax bands, and Welsh rates apply too—these affect final tax liability, not CIS deductions.
A Contractor’s Compliance Checklist
● Register for CIS before paying subcontractors.
● Verify subcontractors through HMRC to apply correct deductions.
● Deduct CIS accurately (20% or 30%) and keep records.
● Submit monthly returns on time.
● Pay CIS tax to HMRC by deadline.
● Communicate with subcontractors to ensure they receive correct statements.
● Use accounting software tailored for CIS to avoid errors.
● Review HMRC penalty notices promptly and seek advice if needed.
How to Avoid the Most Common Errors
● Mixing up PAYE and CIS payments: Contractors sometimes misclassify employees as subcontractors, setting off HMRC investigations.
● Not verifying subcontractor status, triggering bulk 30% deductions.
● Late filing of CIS returns leading to fines.
● Overlooking CIS records when completing Self Assessment.
● Ignoring the frozen personal allowance and National Insurance bands, which can cause miscalculations in tax payments.
Summary of Key Points
CIS is a tax deduction scheme requiring contractors to deduct tax from payments to subcontractors, reducing their income tax liability.
It works as a prepayment of income tax but does not cover National Insurance.
Subcontractors must register with HMRC and provide verification details to avoid higher 30% tax deductions.
Contractors are responsible for verifying subcontractors, deducting the correct CIS rate, and reporting monthly to HMRC.
The personal allowance for 2025/26 remains frozen at £12,570, with basic rate tax up to £50,270 (except Scottish and Welsh variations).
CIS deductions reduce tax liability but do not affect allowable business expenses—keep thorough expense records.
Multiple income streams need careful consolidation when preparing your Self Assessment to avoid surprises or penalties.
Incorporated businesses receive gross payments under CIS and must manage corporation tax separately.
Verify your CIS deductions regularly using the HMRC personal tax account to catch errors or discrepancies early.
Late or inaccurate CIS returns and payments can trigger penalties; timely compliance is critical for contractors.
Special cases like emergency tax, child benefit charge thresholds, and regional tax differences can impact your overall tax position—plan accordingly.
FAQs
Q1: How can someone check if their CIS deductions have been correctly recorded by HMRC?
A1: Well, it’s worth noting that subcontractors can log into their personal tax account to view all CIS deductions submitted by contractors. This is a practical way to cross-check the amounts shown on your contractor statements against what HMRC has on record. Doing this regularly helps spot errors early, like missing deductions or overpayments. For instance, I advised a Leeds plumber who spotted £2,000 worth of unrecorded deductions, which he then rectified before filing his Self Assessment.
Q2: What happens if a subcontractor works for contractors in both Scotland and England?
A2: In my experience, this can cause confusion because while CIS deductions remain standard at 20%, the tax bands applied at Self Assessment differ. Scottish taxpayers have slightly varied tax rates, starting the basic rate at 19%, which affects the final tax due. So, subcontractors working across these regions must be careful to apply the correct regional tax bands when calculating their overall tax liability, or they might under- or overpay tax unknowingly.
Q3: Can a self-employed person who does some construction work but also non-construction freelance work fall under CIS for all their income?
A3: Not exactly. CIS only applies to payments for construction-related activities, so your non-construction freelance income wouldn’t be subject to CIS deductions. However, all income, construction or not, must be reported in one Self Assessment tax return. Consider Sally in Bristol who does landscaping (some of which falls under CIS) and digital design work—not all her income attracts CIS deductions, just the construction-related services.
Q4: How can a subcontractor with multiple contractors avoid confusion with CIS records?
A4: Keep a simple but detailed ledger showing gross payments and CIS deductions per contractor. When tax time rolls around, collate this to avoid missing a deduction or double counting income. A simple spreadsheet or accounting software capturing date, contractor, gross pay, and deductions works wonders. Clients using this system save hours and avoid costly HMRC queries.
Q5: What should a contractor do if they accidentally apply the wrong CIS deduction rate?
A5: If you’ve applied a 30% deduction when the subcontractor was verified for 20%, or vice versa, it’s important to correct this swiftly. Notify HMRC and submit an amended monthly return if possible. Delays risk penalties or incorrect tax payments. In my practice, I’ve helped contractors fix such errors by timely communication with HMRC and subcontractors, minimising disruption.
Q6: How does emergency tax impact a subcontractor’s PAYE income alongside CIS deductions?
A6: Emergency tax can cause excessive tax deductions from PAYE income while CIS deductions are already withheld on contracting earnings. It’s a common trap especially for those starting new jobs alongside contracting. To fix this, taxpayers should check their tax code via HMRC’s portal and request corrections to ensure tax balances accurately at year-end.
Q7: Can a subcontractor claim back overpaid tax if CIS deductions exceed the actual tax owed?
A7: Absolutely, once your Self Assessment calculates your final tax bill, you can claim a refund for any overpaid tax due to CIS deductions. For example, a sole trader in Manchester I worked with recovered a sizeable refund after her contractors withheld more tax than necessary. Keep good records and file promptly for smooth processing.
Q8: What happens if a contractor pays a sole trader gross without deducting CIS tax?
A8: If a contractor fails to deduct CIS where it’s due, they assume responsibility for paying the tax to HMRC, and penalties can follow. The subcontractor still has to declare the income and pay tax at Self Assessment, but the lack of deduction may lead to confusion or cash flow issues for HMRC. Contractors must stay vigilant to avoid this costly mistake.
Q9: Is it possible for a subcontractor to register for gross payment status, and how does that affect CIS deductions?
A9: Yes, subcontractors who meet certain criteria (such as good compliance history and business size) can apply for gross payment status. This means they receive full payments with no CIS deduction, taking on the responsibility to manage their own tax affairs through Self Assessment. It improves cash flow but requires good tax record-keeping and timely payments.
Q10: How does CIS apply to labour-only subcontractors versus those who supply materials?
A10: CIS primarily applies to payments for construction work itself, including labour. If a subcontractor supplies materials as part of a contract—as in a combined materials and labour supply—the rule changes: contractors do not deduct CIS on the cost of materials, only on labour charges. Clarifying this distinction is often a sticking point, and I’ve seen clients dispute CIS deductions wrongly applied on materials.
Q11: Can a landlord doing minor repairs to their own property fall under CIS?
A11: Typically, no. If you’re a homeowner carrying out or hiring work on your own property, CIS doesn’t apply. But if you rent out properties and hire contractors, those contractors might be under CIS obligations. An independent landlord I advised in Birmingham was initially confused but soon understood the difference between owner repairs and subcontracting services.
Q12: How should subcontractors factor in CIS deductions when working overseas for UK contractors?
A12: CIS normally applies only to construction work carried out in the UK. If the work happens overseas—even if paid by a UK contractor—CIS deductions usually don’t apply. However, such income remains taxable and must be reported. Clear contracts and communication with contractors are key in these instances to avoid unnecessary CIS deductions.
Q13: What should a business owner do if their subcontractors don’t supply valid verification details for CIS?
A13: Contractors must verify subcontractors with HMRC before payments. If subcontractors can’t provide verification, the contractor must deduct CIS at the higher 30% rate. Business owners should communicate clearly and help subcontractors register properly, because a 30% deduction often causes cash flow problems and disputes.
Q14: How can changes in National Insurance thresholds affect subcontractors’ net income alongside CIS?
A14: While CIS deductions relate to income tax prepayments, NI contributions are separate and can add a substantial cost burden. For 2025/26, thresholds are frozen, meaning many subcontractors pay more Class 4 NI on profits, tightening net income further. Coordinating tax planning around both tax and NI saves unpleasant surprises at year-end.
Q15: What are common mistakes self-employed taxpayers make when reporting CIS income on Self Assessment?
A15: I often see subcontractors omitting to include accrued income or forgetting to reconcile CIS deducted against actual tax due. Others mix up gross and net income figures, or fail to list all contractors separately. Accurate record-keeping, supported by HMRC’s reports, helps avoid these errors and keeps tax bills on track.
Q16: How does CIS affect a subcontractor’s eligibility for the marriage allowance or other tax reliefs?
A16: CIS deductions lower your taxable income, which can improve eligibility for certain reliefs like the marriage allowance if your income falls under thresholds. However, it doesn’t directly change reliefs—reliefs are based on your final assessed income. Always include all income sources for an accurate picture.
Q17: Can a subcontractor appeal a CIS deduction if they believe it’s been wrongly withheld?
A17: Yes, subcontractors can raise disputes with their contractor or, if unresolved, approach HMRC. In one situation, a client disputed a 30% deduction applied incorrectly due to missing registration details and successfully reduced it to 20% after proving timely registration. Keeping thorough correspondence and evidence is essential.
Q18: Does remote working affect whether a subcontractor is liable under CIS?
A18: CIS applies to construction work physically done on-site or related locations. Remote working tasks like design or planning done from home usually don't attract CIS deductions but may impact your overall taxable income. I’ve seen clients confused when some work was remote while other work was on-site; segment these activities clearly to avoid notifying errors.
Q19: How are CIS deductions reflected if a subcontractor is also on a company payroll?
A19: These are separate tax processes. PAYE deductions on payroll operate independently of CIS deductions on subcontracted work. Both incomes must be combined on your Self Assessment. Failing to amalgamate these may result in underestimating tax liabilities. Checking your tax code and Self Assessment regularly helps balance this.
Q20: What steps should new subcontractors take to avoid CIS-related cash flow issues?
A20: Start by registering with HMRC for CIS and verifying your status to avoid 30% deductions. Keep detailed records of all payments and deductions. If possible, consider applying for gross payment status. Also, budgeting with the assumption that tax will be withheld helps you plan finances better and avoid nasty surprises after invoices.
About the Author:
Adil Akhtar, ACMA, CGMA, serves as CEO and Chief Accountant at Pro Tax Accountant, bringing over 18 years of expertise in tackling intricate tax issues. As a respected tax blog writer, Adil has spent more than three years delivering clear, practical advice to UK taxpayers. He also leads Advantax Accountants, combining technical expertise with a passion for simplifying complex financial concepts, establishing himself as a trusted voice in tax education.
Email: adilacma@icloud.com
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