Understanding the Construction Industry Scheme (CIS): A Practical Guide from MCOC Accountancy Ltd

The Construction Industry Scheme (CIS) is one of those areas that many contractors and subcontractors know exists, but few feel completely confident navigating. At MCOC Accountancy Ltd, we work with construction businesses every day, and we know how important it is to stay compliant while keeping your cashflow steady. Here’s a clear, friendly overview of what CIS means for your business and how we can help.

What Exactly Is CIS?

CIS is a system created by HMRC to ensure that subcontractors in the construction industry pay the correct amount of tax. Instead of waiting until year-end, contractors deduct tax at source from a subcontractor’s payments—usually 20% for registered subcontractors and 30% for unregistered.

Those deductions are then sent directly to HMRC and treated as advance tax payments.

In short: Contractors handle the deductions. Subcontractors benefit from smoother tax payments. HMRC gets paid on time.

Who Needs to Register?

Under CIS, you need to register if you are:

A Contractor

You count as a contractor if you:

• Pay subcontractors for construction work, or

• Spend more than £3 million on construction within 12 months (even if construction isn’t your main business)

Contractors must register with HMRC and follow CIS rules.

A Subcontractor

Subcontractors aren’t legally required to register, but if you don’t, HMRC requires contractors to deduct tax at the higher 30% rate. Registering brings that down to 20%, improving your cashflow significantly.

What Types of Work Does CIS Cover?

CIS applies to most types of construction work in the UK, including:

• Site preparation and groundwork

• Bricklaying, roofing, plastering, decorating

• Installation of systems (e.g., heating, lighting)

• Repairs and demolition

Some professional services—like architecture or surveying—are exempt, but most hands-on construction activities are included.

Common CIS Responsibilities

For Contractors

• Verify subcontractors with HMRC

• Deduct the correct amount of tax

• Submit monthly CIS returns

• Provide payment & deduction statements to subcontractors

• Keep detailed records (HMRC can issue penalties for errors)

  
  

For Subcontractors

• Ensure you’re properly registered

• Keep your details updated

• Claim back overpaid tax at year-end or through your tax return

• Maintain good records for smooth reconciliation

  
  

Why CIS Matters to Your Business

Staying compliant isn’t just about avoiding penalties (though those can be steep). It also ensures:

• You’re paying the correct amount of tax

• Your cashflow remains predictable

• Your books match HMRC’s records

• You avoid costly delays from CIS verification issues

For many construction businesses, the admin can feel overwhelming—but that’s exactly where we come in.

How MCOC Accountancy Ltd Can Help

At MCOC Accountancy Ltd, we support contractors and subcontractors with all aspects of CIS, including:

• CIS registration

• Monthly CIS returns

• Subcontractor verification

• Preparing payment & deduction statements

• Reclaiming overpaid tax

• Payroll and bookkeeping integration

• Advice on minimising disruption and staying organised

Our goal is to make CIS simple, stress-free, and fully compliant—so you can focus on the job, not the paperwork.

Final Thoughts

CIS doesn’t have to be complicated. With the right support, it becomes a straightforward part of running a construction business. If you’re unsure about your obligations or want help getting things in order, MCOC Accountancy Ltd is here to guide you every step of the way.