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How is tax paid under the Construction Industry Scheme (CIS)?

Under the CIS, contractors are required to check whether workers are ‘registered’ with HMRC. In order for the contractor to do this, they will need your Unique Taxpayer Reference (UTR) and National Insurance number.

As explained here, if you are a subcontractor, the payments you receive under the CIS may be subject to tax deductions – 20% for registered subcontractors; 30% for subcontractors not registered with the scheme. If you are a registered subcontractor and approved for gross payment status, then no deductions should be made under the CIS.

Any amounts withheld by the contractor will be paid to HMRC as advance payments towards your individual income tax and National Insurance contributions (NIC) bill for the relevant tax year.

If you are a self-employed subcontractor then you will usually need to complete a Self- Assessment tax return. When you complete your tax return you will need to include your total sales income, which will be the amount that you have invoiced, not the amount you received after the CIS deductions. This is the case even if your invoice includes amounts for things like materials, tool hire etc. Your tax return must also include any business expenses that are to be deducted from your self-employed income to arrive at your self-employed profit.

The amount of tax that has been deducted under the CIS should be entered in box 38 on page SES2 of the self-employed (short) pages and box 81 on page SEF4 of the self-employed (full) pages. This will mean that when your tax and NIC is calculated the advance payments that have been made through CIS deductions will be taken into account.

Updated on 17th July 2023

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