This Practice Note details the obligations imposed by the Construction Industry Scheme (CIS) Rules on contractors, covering the requirement to:

1. •

   register as a contractor

2. •

   verify the Employment status and CIS payment status of its sub-contractors

3. •

   where relevant, deduct tax from payments made to sub-contractors

4. •

   pay the withheld tax and submit CIS returns to HMRC on a monthly basis, and

5. •

   preserve tax records

The CIS was devised to limit the amount of tax lost as a result of sub-contractors in the construction industry under-declaring or failing to notify their chargeability to UK tax.

For an overview of how the CIS works, see Practice Note: Construction industry scheme—overview.

The scheme operates to withhold tax at source at the point of making a 'contract payment', thereby reducing the risk of a subsequent default by the sub-contractor. However, if the sub-contractor can prove it has complied with its tax obligations, and applies for gross payment status, it is able to receive payments gross.

The obligation to deduct tax imposed by the CIS rules applies only