Construction Industry Scheme (CIS) – Contractors reminded to verify subcontractors

The Construction Industry Scheme (CIS) is a government scheme that helps to ensure tax and national insurance are paid correctly on payments made to subcontractors within the construction industry.

If you are a contractor carrying out construction operations, you will need to register for the scheme with HMRC and deduct tax from payments made to subcontractors at the rate advised (either 0%, 20% or 30%). These deductions are paid to HMRC monthly using a CIS return and will be offset against the subcontractor’s own tax and national insurance liability.

HMRC is writing to contractors and asking them to regularly verify the construction industry scheme (CIS) status of their subcontractors.

HMRC is reminding contractors that they must:

• verify all new subcontractors before they pay them;
• verify subcontractors they’ve used before if they haven’t included them on a CIS return in the current tax year, or the previous two tax years; and
• make sure they apply the correct CIS deductions. 

The contractor can verify subcontractors using HMRC’s online service or using commercial software.

If a HMRC compliance check finds errors in a CIS return, this may result in the Contractor incurring penalties and interest.