## CIS Overview The Construction Industry Scheme (CIS) is a UK tax scheme that requires contractors in the construction industry to deduct tax from payments made to subcontractors and pay it to HMRC. ### Who Does CIS Apply To? **Contractors** — Businesses that pay subcontractors for construction work. You're a contractor if you: - Spend more than £3 million a year on construction in a 3-year period, OR - Are in the construction industry and pay subcontractors **Subcontractors** — Individuals or businesses that carry out construction work for a contractor. They are NOT employees — they handle their own tax affairs. The CIS deduction is an advance payment of their tax liability. ### How CIS Works 1. **Verify subcontractors** — Before paying a subcontractor for the first time, verify them with HMRC to find out the correct deduction rate 2. **Make deductions** — When you pay a subcontractor, deduct tax from the labour portion of their payment (not materials) 3. **File monthly returns** — Submit a CIS return to HMRC every month by the 19th, detailing all payments and deductions 4. **Provide statements** — Give each subcontractor a payment and deduction statement within 14 days of the end of each tax month 5. **Pay HMRC** — Pay the deductions to HMRC by the 19th of each month (or 22nd for electronic payments) ### Deduction Rates | Status | Rate | Meaning | |--------|------|---------| | Gross (Registered for Gross Payment) | 0% | Subcontractor receives full payment, no deduction | | Net (Registered) | 20% | Standard deduction rate for registered subcontractors | | Higher Rate (Unregistered) | 30% | Applied when a subcontractor is not registered with HMRC for CIS | ### What Gets Deducted? CIS deductions apply to the **labour cost** only. Materials supplied by the subcontractor are excluded from the deduction calculation: **Total Payment = Labour + Materials** **Deduction = Labour x Deduction Rate** **Net Payment = Total Payment - Deduction** ### Key Deadlines | Action | Deadline | |--------|----------| | Monthly CIS return | 19th of following month | | Payment to HMRC | 19th (postal) or 22nd (electronic) | | Statement to subcontractor | Within 14 days of tax month end | ### CIS Tax Months CIS operates on **tax months**, which run from the 6th of one month to the 5th of the next: - Month 1: 6 April - 5 May - Month 2: 6 May - 5 June - ...and so on through to Month 12: 6 March - 5 April ### dynamik.app CIS Features dynamik.app supports the full CIS workflow: - Mark suppliers as CIS subcontractors with their UTR and tax treatment - Automatically calculate CIS deductions on bills - Create and submit monthly CIS returns to HMRC - Import deductions from paid bills - Generate payment and deduction statements as PDFs