The Construction Industry Scheme (CIS) is a set of special rules for tax and National Insurance for those working in the construction industry. Businesses in the construction industry are known as 'contractors' and 'subcontractors' and should be aware of the tax implications of the scheme.

Under the scheme, contractors are required to deduct money from a subcontractor’s payments and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and National Insurance.

Monthly returns must be submitted online. The monthly return relates to each tax month (i.e., running from the 6th of one month to the 5th of the next). The deadline for submission is 14 days after the end of the tax month. Even if no subcontractors have been paid during a month, contractors still have to make a nil return. All contractors are obliged to file monthly returns even if they are entitled to pay their PAYE quarterly. The returns can be filed using the HMRC CIS online service or approved commercial CIS software. There are penalties for late returns.

Contractors who have not paid subcontractors in a particular month are required to submit a 'CIS nil return' or notify HMRC that no return is due. If this is likely to be a longer term ‘nil return’, the contractor can contact HMRC to make an inactivity request stating they have temporarily stopped using subcontractors. This request lasts for 6 months. You must notify HMRC if you start using subcontractors again during this period. 

Contractors are defined as those who pay subcontractors for construction work or who spent more than £3m on construction during a year in the 12 months since they made their first payment.