The Construction Industry Scheme or CIS is a mandatory tax regime under which almost all construction companies must operate.  Under the Scheme contractors deduct money from the payments they make to sub-contractors, and pass it on directly to Revenue and Customs.  These deductions count as advance payments towards the sub-contractors’ tax and National Insurance contributions.

All contractors must register for the scheme; Sub-contractors don’t have to register, but deductions are taken from their payments at a higher rate if they do not. A sub-contractor must pass certain tests if they wish to be paid without deduction. The standard rate of deduction is 20%, and 30% deductions are applied to sub-contractors who are not known to the revenue. All sub-contractors must be “verified” with HMRC by their contractor before they are paid.