Contractors in the Construction Industry Scheme must verify each subcontractor with HMRC, deduct 20% (registered) or 30% (not registered) from the labour part of their payments, pay the deductions to HMRC and file a monthly return. Subcontractors with gross payment status have nothing deducted. Monthly returns are due by the 19th, and payments by the 22nd (19th by post).
Step by step
- Register as a contractorWith HMRC.
- Verify each subcontractorHMRC tells you the deduction rate.
- Work out the deductionTake off VAT and materials, then deduct 20% or 30%.
- Give a statementPayment and deduction statement within 14 days of the end of the tax month.
- File and payMonthly return by the 19th; pay by the 22nd (19th by post).
Worked example. £1,200 invoice including £200 VAT and £300 of materials: labour £700, deduction 20% = £140, pay the subcontractor £1,060.
| Status | Deduction |
|---|---|
| Registered | 20% |
| Not registered | 30% |
| Gross payment status | 0% |
Frequently asked questions
What penalty is there for giving the wrong status?
GOV.UK says you could get a penalty of up to £3,000 for giving the wrong employment status for a subcontractor on your monthly return.
Do CIS deductions apply to materials?
No, nor to VAT.
When is the CIS return due?
By the 19th of every month following the last tax month.
Sources
This guide is general information, not legal or tax advice. Last checked 4 November 2026. Rules change; check the sources above.