Construction Industry Scheme (CIS): what it puts on your payslip

The published figures

What it puts on, or takes off, the payslip

Contractor's name and employer tax reference

Identifies who took the money. A PAYE payslip carries the employer name for the same reason. If the name on the statement is a different company from the one you invoiced, the payment has been routed through another entity and the statement should say so.

Tax month ending

The end date of the tax month the payment fell in, written as something like "tax month ending 5 May". A contractor can issue one statement per tax month or one per payment. This is the nearest thing CIS has to a pay period, and it is not a calendar month.

Your name and Unique Taxpayer Reference

Your UTR is doing the job a National Insurance number and a payroll number do on a payslip. It has to match what you gave HMRC when you registered, because that is what the contractor used to verify you.

Verification number

Only appears when the deduction has been taken at the higher rate because you could not be verified. On a statement at the standard rate the contractor does not have to show it. Seeing one is a signal to check your registration.

Gross amount of payment

The total payment excluding any VAT you charged. Travel, fuel for travelling, accommodation and subsistence paid to you belong inside this figure. Amounts the contractor withheld for the CITB levy, public liability insurance or its own administration charge are left out of it, because the scheme applies to the payment actually made.

Cost of materials

What you paid directly for materials, consumable stores, fuel used other than for travelling, plant hired in for the job and the manufacture or prefabrication of materials. Only a cost you incurred yourself goes here. Materials the contractor bought and supplied to you do not, and neither does plant you already own, although fuel for your own plant still does.

Amount of the deduction

The percentage applied to gross payment minus cost of materials. This is the line that behaves least like a payslip: it is a single figure that stands in for both Income Tax and Class 4 National Insurance, worked out with no tax code and no personal allowance behind it.

What the statement does not carry

There is no tax code, no personal allowance, no separate National Insurance line, no pension and no year to date column. Nothing on the statement tells you whether you have paid too much, because the scheme takes a flat percentage of labour and the reckoning happens later on your return.

VAT and the reverse charge

VAT is not on the statement, because the deduction is worked out after VAT is stripped out. It is on the invoice underneath it. Since 1 March 2021 a VAT registered subcontractor supplying a VAT and CIS registered contractor charges no VAT and states on the invoice that the reverse charge applies, so the contractor accounts for the VAT instead.

What goes wrong

A deduction taken on materials you paid for

The deduction is only supposed to fall on the part of the payment that is not the direct cost of your materials. If the materials box on the statement reads zero on a supply and fix job, the contractor has taken 20% or 30% of money that was never your labour. The usual cause is that you sent no receipts, and the contractor is entitled to estimate the materials figure when you cannot evidence it.

30% taken because verification never happened

The higher rate applies when the contractor cannot match your details against HMRC's record, not only when you are unregistered. A trading name given instead of your legal business name, a transposed UTR, or a company number omitted for a limited company will all produce a failed verification and a 30% deduction on someone who is properly registered. The extra 10% is not lost, but you carry it until your return.

No statement issued at all

The contractor has to give you a written statement within 14 days of the end of each tax month whenever a deduction was made. Without it you have no evidence of what was taken, and HMRC can ask for that evidence when you claim it. If the contractor has gone out of business you can write to HMRC with your details, the contractor's name and address, the dates of the payments and why you have no statement.

A limited company that never offsets the deduction

A company recovers CIS through its own payroll, by filing an Employer Payment Summary alongside the Full Payment Submission with the year to date CIS deductions on it. A company that files only the FPS pays its PAYE and National Insurance bill in full every month while HMRC is already holding the CIS money, and it can run a whole tax year that way. Claiming it on the Corporation Tax return instead is specifically the wrong route and can carry a penalty.

CIS operated where the engagement is really employment

The scheme cannot apply to a contract of employment. If you work set hours for one contractor, use its plant, take its instruction on how the work is done and cannot send a substitute, the arrangement may be employment however the invoices are worded. The contractor has to consider your status when you are first engaged and declares on every monthly return that it has done so. Having been self employed before does not settle it.

The reverse charge applied or missed on the same invoice

The reverse charge and CIS ride on the same invoice and they are separate rules. A VAT registered subcontractor who charges 20% VAT to a VAT and CIS registered contractor on a standard rated supply has invoiced it the old way and will usually be asked to reissue. A subcontractor who applies the reverse charge to an end user, meaning a customer who makes no onward supply of construction services and has said so in writing, has applied it where it does not belong.

Travel and subsistence taken out of the gross figure

Accommodation, subsistence and fuel for travelling that a contractor pays you belong inside the gross payment the deduction is calculated on. They are not materials. A contractor that strips them out before applying the percentage has under deducted, and HMRC can pursue the contractor for the shortfall rather than you.

What to check on your next payslip

• Verification is a match against HMRC's record, so the exact legal business name, UTR and, for a company, the company name, company UTR and registration number are what a new contractor needs. A near miss produces a 30% deduction instead of 20%, and on £3,000 of labour in a month that is £300 of your cash sitting with HMRC until your return.
• The payment and deduction statement for each tax month is the only evidence of what was taken, and it belongs with the invoice it relates to. HMRC can ask for evidence of the deductions you claim. If your claim is not evidenced by the deadline HMRC gives you, HMRC can change it on the information it has and stop you making further claims that tax year.
• Only a cost you paid directly comes out before the deduction, so merchant receipts for materials, hired plant and plant fuel are what put those costs on their own invoice line. Without evidence the contractor estimates the figure, and an estimate that runs low costs you 20% of the difference on every invoice.
• The arithmetic on a statement is gross payment minus cost of materials, times the rate, equals the deduction. It is three numbers and one multiplication, and it is the only test that catches a deduction taken on the wrong base. HMRC's own worked example is a tiler on a £600 payment with £240 of materials: £360 is liable and £72 comes off.
• A limited company recovers CIS through an Employer Payment Summary carrying the year to date figure, filed each month alongside the Full Payment Submission. The Full Payment Submission alone does not claim the deduction. Nothing on the company's PAYE bill shows the money is missing, so whoever runs the payroll is the only person who can confirm it, and this can run unnoticed for a full year.
• The Self Assessment return wants your income as the gross before deductions, with the statement totals entered separately as CIS deductions. The deduction was taken from labour with no personal allowance applied, so a subcontractor with ordinary earnings is often due money back rather than more to pay. Reporting net income instead of gross understates both sides and produces the wrong answer.
• HMRC's Check Employment Status for Tax tool gives HMRC's own view of an engagement, and HMRC stands by the result as long as the information given stays accurate and follows its guidance. Employment status decides tax treatment, and it is decided by the terms of the engagement rather than by which scheme you are registered for. A saved result is the record of what HMRC was told, which is what the assurance attaches to.

The 19 occupations this reaches, and how

Each line is specific to that trade. Where a scheme depends on how you are engaged rather than on the work itself, the line says so.

Bricklayer

The statute names walls among the works forming part of the land, so laying, altering or repairing brickwork is a construction operation. Whether a deduction reaches your money is a separate question. A bricklayer on the firm's own books has tax taken at source as wages, and the deduction regime and a job with wages are alternatives rather than layers. Gangs are usually priced labour only with the main contractor buying the bricks, blocks and mortar, so there is often nothing in the materials box on the statement and the percentage falls on the whole invoice. A garden wall billed to the occupier of the house it belongs to raises no deduction either.

Carpenter

First and second fix carpentry on site is a construction operation, and so is fitting prefabricated units under a supply and fix arrangement. Making those units is not: HMRC lists manufacture and offsite fabrication of components, and their delivery to site, among the excluded operations. A bench joiner who only manufactures sits outside the scheme until the same business takes on the fitting.

Construction Worker

For general site labour the scheme turns on how you are taken on rather than on what you carry. Paid by a main contractor or a gang leader for your own labour, you are a subcontractor and the deduction applies. Taken on by the same firm under a contract of employment, you get a payslip and PAYE instead, because the scheme cannot apply to an employee. HMRC puts the duty to consider that question on the contractor at the point of engagement.

Dryliner

Boarding, taping and skimming changes the fabric of a building, so drylining is a construction operation. The scheme bites only on a self employed engagement, though: where the drylining firm puts you on its payroll the money is wages, and CIS has no application to wages. Drylining is usually priced per square metre as labour only with the main contractor buying the board and the metal, which means the materials figure on your statement is often zero and the invoice is liable in full. Board and skim invoiced straight to somebody having their own house done falls outside all of it.

Electrician

Installing lighting, power supply and distribution in a building is a construction operation, and so is CCTV installed for something other than security, such as traffic management. Repairing, servicing or maintaining a system already installed is excluded, as is fitting a burglar alarm or a security CCTV system, and so is running cable through pre-existing ducting. That is why a warranty callout on equipment you supplied can sit outside the scheme when the first fix sat inside it.

Flooring Installer

HMRC treats fitting floor coverings as a finishing operation, in the scheme only where it completes a building that has been constructed or altered, and names vinyl, linoleum and laminated wooden flooring as included and carpet as not. Laying a concrete or marble floor is a construction operation in its own right. So the same fitter can be inside the scheme on Monday's laminate and outside it on Tuesday's carpet.

Glazier

Installing and repairing glazing in a building or structure is a construction operation. Manufacturing the glazing materials and delivering them to site is not, and neither is fitting blinds or louvred shutters, or applying solar, blackout or anti shatter film. A firm that makes its own units and then fits them is inside the scheme on the fitting, and the glass it paid for should show as materials on the statement.

Groundworker

Site clearance, earth moving, excavation, tunnelling, boring, piling and laying foundations are all named as operations preparatory to construction, so groundworks are the kind of work the scheme covers. Whether it covers YOU depends on the engagement, because a groundworker holding a job rather than a contract is paid through PAYE and never receives a deduction statement at all. Transport of spoil off site is excluded on its own, but HMRC's rule is that where a single contract mixes included and excluded work, every payment under it falls within the scheme, so a package with muckaway inside it is caught in full.

Insulation Installer

Installing thermal insulation in a building being constructed, altered or repaired is a construction operation, while manufacturing and delivering the insulation materials is excluded. Who pays matters more than usual in this trade: a cavity wall or loft job billed straight to a homeowner carries no deduction, because a private householder is not a contractor, and the identical job billed to the installer or main contractor that subcontracted it does.

Painter & Decorator

The statute names painting or decorating the internal or external surfaces of any building or structure, so decorating a house, a shop or a factory unit is inside the scheme. Spraying a finished product on a production line is not, because what is being painted is goods rather than a building or structure. Signwriting and erecting, installing or repairing signboards and advertisements are excluded, so a decorator who also does shop signage should expect the two parts of the job to be treated differently. HMRC's own worked example is a VAT registered painter on a £600 job with £200 of materials: £400 is liable and £80 comes off.

Pipefitter

Installing pipelines, gas mains, sewers and drainage is a construction operation, and so is constructing and repairing industrial plant. Drilling for or extracting oil or natural gas is excluded by the statute, and so is fabricating pipework offsite and delivering it. A pipefitter on a process plant build is normally inside the scheme; the same trade on a gas extraction operation may not be.

Plasterer

Plastering, rendering and skimming alter the fabric of a building, so the work is a construction operation on any job. Two separate things then decide whether money is taken off yours. The first is who is paying: a plasterer invoicing a homeowner direct has no deduction taken, because HMRC says a private householder is not a contractor, while the same plasterer invoicing the builder working for that homeowner does. The second is how you were taken on, since a plasterer engaged as staff sits outside the scheme and gets a payslip instead of a statement.

Plumber

Installing systems of heating, drainage, sanitation and water supply in a building is a construction operation. Replacing system parts with no other construction work is not, and HMRC gives a tap or a radiator as the example, nor is servicing or maintaining a system that is already in. A plumber on a bathroom or heating installation for a main contractor is inside the scheme; the same plumber on a radiator swap or an annual boiler service may not be.

Roofer

Covering, stripping and repairing a roof is alteration and repair of a building, so roofing is a construction operation. Neither of the two things that keep a roofer out of the scheme has anything to do with the roof: being on staff at the roofing firm instead of subcontracting to it, and being paid by the individual whose roof it is, who runs no scheme on work to their own home. Roofers commonly supply their own tiles, felt, battens and lead, and only materials the subcontractor paid for directly come out before the deduction, so the merchant receipts matter: without them the contractor is entitled to estimate that figure on your behalf.

Scaffolder

Erecting and dismantling scaffolding, falsework and formwork is named as a construction operation, so a scaffolding firm paid by a main contractor is inside the scheme. Hire of scaffolding equipment without labour is named as excluded, so a pure hire invoice is not. And a scaffolder employed by the hire company under a contract of employment is on PAYE with a payslip, because the scheme never reaches an employee. The same person can meet all three in a year.

Shopfitter

Installing and repairing shop fittings, including fixed furniture, is a construction operation, but HMRC excepts seating and freestanding display cabinets, and separately excludes the manufacture, delivery and installation of seating, blinds and louvred shutters. Making the units offsite is excluded too. A fit out contract covering both the fixed joinery and the loose furniture is still caught in full, because a contract that mixes included and excluded work falls within the scheme in its entirety.

Site Manager

Running a site is not itself in the list of construction operations, and site managers are usually employees of the main contractor on PAYE, with the scheme operating on the subcontractors below them rather than on their own pay. A freelance site manager supplied through a personal company or an agency is a separate question, settled by employment status and the off-payroll working rules, and HMRC says the scheme is not operated on payments where the off-payroll rules apply.

Stonemason

Cutting, setting and repairing stone as part of a building or structure is a construction operation. Making, installing and repairing works that are wholly artistic is excluded, and HMRC names sculptures and murals, so memorial and sculptural work can fall outside the scheme while the same mason's repair of a stone facade falls inside it. Masonry cut offsite and delivered counts as materials rather than as labour.

Tiler

Tiling walls and floors alters the fabric of a building, so it is a construction operation, and HMRC's own supply and fix worked example in CIS 340 is a tiling subcontractor. The word subcontractor there is doing real work: a tiler holding a job is paid wages and the scheme passes over them, and a tiler retiling a bathroom for the person who lives in it is untouched too, that customer being nobody's contractor. The example repays reading before you check a statement: on a £600 payment with £240 of materials, £360 is liable and £72 comes off, and because the tiler in it is not registered for VAT the VAT paid on the tiles counts as part of the materials cost rather than being stripped out.

Questions

Sources