Getting paid and paying tax under CIS

Gross or Net

CIS contractors can make either gross payments (no tax) or net payments (the amount after tax) to subcontractors for construction work. The amount of tax due depends on how HMRC have classified the CIS subcontractor.

• Subcontractors who don't register with HMRC will be deducted the higher rate of tax which is 30%. Some subcontractors can get their pay without any tax being deducted, so it's definitely worth registering with HMRC.

For subcontractors who do not qualify for tax free income, 20% tax will be deducted from your pay by the contractor. This money is then paid to HMRC by the contractor.

VAT, cost of materials and some other expenses like plant hire do not come under the scheme and are not subject to tax.

Travel and subsistence expenses are classified as pay and so will be liable for deductions. At the end of your or your company's financial year you are required to complete a tax return. HMRC, your accountant or you can calculate your tax and NIC liability and should then set aside any deductions which you have suffered in respect of CIS tax from it.