What is Construction Industry Scheme? UK Definition 2026/27
Quick Answer
A scheme requiring contractors to deduct tax from subcontractor payments in construction.
Definition of Construction Industry Scheme
The Construction Industry Scheme (CIS) requires contractors in the construction industry to deduct money from subcontractor payments and pass it to HMRC. These deductions count as advance payments towards the subcontractor's tax and NI. Most subcontractors have 20% deducted, but gross payment status allows 0% deduction.
Construction Industry Scheme — Key Facts for 2026/27
| Standard deduction | 20% |
| Unregistered rate | 30% |
| Gross payment | 0% |
| Monthly returns | Required |
How Construction Industry Scheme Works — Example
- 1Invoice amount: £1,000
- 2Materials (exempt): £200
- 3Labour element: £800
- 4CIS deduction (20%): £160
- 5Payment received: £840
- 6CIS deducted counts towards tax bill
How Construction Industry Scheme Affects Your Tax
CIS ensures construction workers pay tax throughout the year. Subcontractors should apply for gross payment status if eligible to improve cash flow. CIS deductions can result in tax refunds if more was deducted than owed.
Official HMRC Guidance on Construction Industry Scheme
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
HMRC: Construction Industry SchemeFrequently Asked Questions about Construction Industry Scheme
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.