The Construction Industry Scheme (CIS) is a tax scheme that applies to contractors and subcontractors in the construction industry. The scheme was introduced to combat tax evasion in the industry and ensure that contractors and subcontractors pay the correct amount of tax.

Under the CIS, contractors are required to register with HM Revenue and Customs (HMRC) and to verify the employment status of their subcontractors, before they pay them for the first time. Subcontractors are also required to register with HMRC and provide their Unique Taxpayer Reference (UTR) to their contractors.

Contractors are required to deduct tax from subcontractors who are not registered for gross status, at a rate of 20% or exceptionally, 30%. The deductions are then reported to HMRC on a monthly basis using a CIS return. Subcontractors can claim back any overpaid tax suffered by deduction when they file their own tax returns.

The CIS scheme applies to most construction work, including building, decorating, and engineering work. There are some exceptions and it is particularly important to be sure of the rules at the outset of new work.

Failure by contractors and subcontractors in the construction industry to comply with the CIS requirements can result in penalties and interest charges.