How Does the Construction Industry Scheme (CIS) work?

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CIS (short for “the Construction Industry Scheme“) was set up by HMRC to collect income tax throughout the year from people working in the construction industry.

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Construction companies deduct tax on behalf of their workers (subcontractors) and send the money to HMRC as tax payments:

20% for workers who have registered themselves as subcontractors with HMRC

30% for those who have not

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Note that CIS only applies if you work in construction as a subcontractor and you have registered for CIS – here is how you do it.

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Example of how CIS works

Best Brickworks Ltd hires Tommy Jones on their site as a subcontractor. Every month Tommy is owed £1,500 pounds for his work.

Every month the company pays £300 (20% of the £1,500) to HMRC as Tommy's taxes
The company sends a CIS statement or payslip to Tommy as proof
The company pays the remaining £1,200 to Tommy as payment for his work
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How do CIS refunds work?

In the example above, Tommy's annual income was £18,000 (£1,500 * 12).

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Tommy technically owes HMRC £2,370.20 (£1,230 Income tax + £1,015 national insurance).

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However, throughout the yearBest Brickworks Ltd paid £3,600 in taxes on Tommy's behalf!

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Tommy is now due a refund.
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Need to file your CIS tax return?

Good news, Earnr can manage your tax return for you for just £99. You can download the app and make use of the our other features for free!

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Learn more and download Earnr here.

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