CIS Tax – FAQs Q1. What is the Construction Industry Scheme and who does it apply to? The Construction Industry Scheme (CIS) is an HMRC tax framework for the UK construction sector. Under CIS, contractors deduct money from subcontractor payments and pass it to HMRC as advance payment toward the subcontractor's tax and National Insurance. CIS applies to most construction work in the UK including site preparation, alterations, dismantling, and decoration. Both contractors and deemed contractors (non-construction businesses spending heavily on construction) must register and operate the scheme correctly. Q2. What are the current CIS deduction rates in 2025/26? CIS deductions are 20% for subcontractors registered under the scheme and verified by the contractor, 30% for unregistered or unverified subcontractors, and 0% for those holding gross payment status. The deduction is taken from the labour element only, not from materials, VAT, or certain other costs. Getting this calculation right is essential because over-deduction reduces subcontractor cash flow and under-deduction creates HMRC liability for the contractor. Q3. How do I claim back CIS tax I have paid? How you reclaim CIS depends on your business structure. Sole traders and partnerships claim CIS through their Self Assessment tax return, where the deductions are offset against the tax due. Limited companies offset CIS against PAYE liabilities through monthly EPS submissions, with any excess refundable at the end of the tax year. Atlas Tax Advisors regularly recovers significant CIS refunds for Milton Keynes subcontractors who had assumed nothing more could be reclaimed. Q4. What is CIS gross payment status and how do I qualify? Gross payment status (GPS) means contractors pay you in full without deducting CIS. To qualify, your business must pass HMRC's business, turnover, and compliance tests, including a minimum turnover threshold (£30,000 for sole traders and £30,000 per partner or director for partnerships and companies, or £100,000 net for the whole business) and a clean compliance record over the last 12 months. We help clients prepare strong GPS applications and maintain ongoing compliance. Q5. When are monthly CIS returns due and what are the penalties for late filing? Contractors must file a CIS return for every tax month, which runs from the 6th of one month to the 5th of the next, with the return due by the 19th of the month. Even if no payments were made to subcontractors, a nil return must still be filed. Late filing penalties start at £100 and escalate quickly, with further penalties at three months, six months, and 12 months. Atlas Tax Advisors files monthly returns reliably for every CIS client. Q6. Do I need to register for CIS if I only work for one main contractor? Yes, if you carry out construction work as a subcontractor in the UK you should register under CIS regardless of how many contractors you work for. Registration is free and reduces your deduction rate from 30% to 20%, which is a substantial cash-flow benefit. If you remain unregistered, contractors are obliged to deduct at the higher 30% rate, leaving you waiting until your year-end tax return to reclaim the difference. Q7. Can materials be excluded from the CIS deduction? Yes, but only the actual cost of materials genuinely incurred by the subcontractor for the specific contract. Travel, plant hire, fuel for plant, scaffolding hire, and consumables can sometimes be included or excluded depending on the contract terms. HMRC scrutinises this area carefully because it directly affects the deduction calculation. Keep clear invoices identifying materials separately, and we can help you structure invoices in a way that supports legitimate exclusions without raising HMRC concerns. Q8. What records must contractors keep for CIS compliance? Contractors must keep records of every subcontractor verification, the gross amount paid, materials cost, and tax deducted, for at least three years after the end of the relevant tax year. They must also issue a written deduction statement to each subcontractor for every tax month containing payments. Atlas Tax Advisors uses CIS-compatible software that produces compliant deduction statements automatically and stores everything securely with full digital audit trails for HMRC inspections. Q9. Does CIS apply to property landlords or developers? It can. A landlord or property developer who spends an average of £3 million or more per year on construction operations over a rolling three-year period is treated as a deemed contractor and must operate CIS. The rules also catch property investors who are heavily involved in construction projects. Many landlords are caught unawares by these rules, so speak to us early if you are planning significant construction or refurbishment spending across multiple properties. Q10. Can Atlas Tax Advisors handle CIS for a brand-new construction business? Yes, we frequently set up new contractors and subcontractors from scratch. We register your business with HMRC under CIS, configure monthly verification and return filing, set up CIS-compliant invoicing in your bookkeeping software, and explain the practical paperwork required on site. We also coordinate CIS with PAYE if you employ workers directly, so the whole tax position is joined up from day one and ready to grow with your construction business.