The Construction Industry Scheme (CIS) is used within the UK construction sector to help manage payments between contractors and subcontractors effectively. This scheme mandates that contractors deduct a portion of payments made to subcontractors, remitting these funds directly to HMRC. These deductions function as advance payments towards the subcontractor’s tax and National Insurance obligations.
A significant administrative update to the CIS scheme took effect from 6 April 2026. From this date, construction contractors are once again required to file a nil return for any month in which they have not paid subcontractors. This reinstatement of the nil filing obligation aims to prevent erroneous late filing penalties that previously arose when contractors did not make payments but also did not inform HMRC. Contractors are required to either file a nil return or notify HMRC in advance if they will not be making any subcontractor payments for a given month; failure to do so without a reasonable excuse could result in penalties.
For any business operating within the construction sector, whether based in the UK or abroad, a thorough understanding of the CIS regulations is important. Beyond mere compliance, accurate registration, precise deductions, and punctual submissions are fundamental to sound financial governance and crucial for avoiding potential penalties.
Contractors are required to register for the scheme. While subcontractors are not required to register, a higher rate of deduction will be applied to their payments if they are unregistered. Registered contractors can use CIS online to file monthly returns or verify subcontractors.
Businesses must register as a contractor if they pay subcontractors for construction work, or if their business, despite not performing construction work itself, has spent over £3 million on construction in the 12 months since its first payment. Registration as a subcontractor is required if a business undertakes construction work for a contractor. If a business meets the criteria for both, it must register as both a contractor and a subcontractor.