Taxlab helps construction subcontractors and contractors across Bathgate and West Lothian get the Construction Industry Scheme (CIS) right. We claim back overpaid CIS deductions, file monthly returns for contractors, and keep your tax affairs in order so you can concentrate on the job.
What is the Construction Industry Scheme?
Under the Construction Industry Scheme, contractors deduct money from payments to subcontractors and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and National Insurance. CIS covers most construction work in the UK, including repairs, decorating, demolition and site preparation. Employees do not need to register, so check your employment status if you are unsure.
CIS for subcontractors
Deduction rates
- 20% if you are registered for CIS and the contractor can verify you
- 30% if you are not registered, or the contractor cannot verify you
- 0% if you have gross payment status
Deductions are only taken from the labour element of your invoice, not from VAT, materials you paid for, consumable stores, plant hire or the cost of manufacturing or prefabricating materials. Keep receipts for materials, as your contractor may ask for evidence. Your contractor must give you a payment and deduction statement within 14 days of the end of each tax month (GOV.UK).
How to register
You will need your legal business name, Unique Taxpayer Reference (UTR), VAT number if registered, and the date you started trading. If you do not have a UTR, registering as a new business for Self Assessment and choosing “working as a subcontractor” registers you for both at once. See how to register as a subcontractor.
Claiming back CIS deductions
- Sole traders and partners: include your gross pay and total CIS deductions on your Self Assessment return. HMRC sets the deductions against your bill and repays any overpayment. Many subcontractors are due a refund.
- Limited companies: set CIS deductions against your PAYE liability each month using an Employer Payment Summary (EPS), and claim a refund of anything left at the end of the tax year. Do not use your Corporation Tax return, as you may get a penalty (GOV.UK).
Gross payment status
With gross payment status you are paid in full and pay your tax at the end of the year. To qualify, you must have paid your tax on time in the past, do construction work in the UK, run your business through a bank account, and have turnover over the last 12 months (excluding VAT and materials) of at least:
- £30,000 as a sole trader
- £30,000 for each partner, or £100,000 for the whole partnership
- £30,000 for each director, or £100,000 for the whole company (£30,000 for each person if the company is controlled by 5 people or fewer)
HMRC reviews gross payment status every year, and late returns or payments can lead to it being withdrawn.
CIS for contractors
- Register as a contractor before you take on subcontractors.
- Verify each new subcontractor with HMRC before paying them, and any you have not included on a return in the current or last 2 tax years (GOV.UK).
- Deduct at the rate HMRC gives you and send each subcontractor a monthly statement.
- Pay deductions to HMRC by the 22nd of the month (19th if paying by post).
- File your monthly return by the 19th, including a nil return or inactivity request if you made no payments.
Late monthly returns attract a £100 penalty after 1 day, £200 after 2 months, and the greater of £300 or 5% of the CIS deductions after 6 and 12 months. Declaring the wrong employment status for a subcontractor can cost up to £3,000 (GOV.UK).
VAT domestic reverse charge
If you are VAT registered, most building and construction services supplied to other VAT-registered businesses in the CIS are covered by the VAT domestic reverse charge. The customer accounts for the VAT instead of paying it to you. We can check your invoices are set up correctly. See our VAT services.
Expenses subcontractors can claim
- van and car costs for the business share of use, or HMRC’s simplified mileage rates instead (for cars and vans in 2026/27: 55p a mile for the first 10,000 business miles, 25p after that, rising to 35p from April 2027)
- tools and equipment
- protective clothing and safety equipment, such as hi-vis vests, gloves, boots and helmets
- the business share of your mobile phone
- travel and subsistence to temporary sites
- training, certification and trade memberships
- accountancy fees, stationery and postage
How Taxlab can help
- CIS registration and gross payment status applications
- Self Assessment returns and CIS tax refund claims for subcontractors
- monthly CIS returns, verification and statements for contractors
- payroll, PAYE and CIS for construction companies
- bookkeeping in Xero or FreeAgent, both of which handle CIS
- VAT returns, including the domestic reverse charge
Frequently asked questions
Will I get a CIS tax refund?
Often, yes. Deductions are taken at 20% of your labour, before any expenses or your Personal Allowance, so many subcontractors overpay. We work out your refund and claim it through your tax return.
What happens if my contractor deducted 30%?
Usually this means you were not registered or could not be verified. The extra deductions still count towards your tax and can be reclaimed, but register or update your details with HMRC so future payments are taken at 20%.
Get in touch
Talk to Taxlab about CIS. Contact us, call 0845 862 6009 or message us on WhatsApp.
This page gives general information only and does not constitute professional advice. Checked against GOV.UK guidance in October 2026.