Construction sector

CIS accountants for contractors and subcontractors

Whether you pay subcontractors or have tax deducted from your own invoices, we help you account for it. Our Construction Industry Scheme (CIS) work covers verification, monthly returns, deduction statements and reclaiming company deductions through payroll. We review construction VAT alongside the CIS records.

Discuss your CIS setup

CIS deduction rates

Gross payment status: 0%
CIS-registered subcontractor: 20%
Unverified or unregistered: 30%

Apply HMRC's rate after removing VAT charged and qualifying direct costs. Materials mark-ups and charges for using your own plant are not excluded. We check the calculation against the supporting invoices.

Working with Blue Jay

CIS support for the way you work

You may pay other trades on one job and have CIS deducted from your own invoices on another. We keep the two records separate and reconcile them with your accounts and HMRC submissions.

If you pay subcontractors

You are responsible for the contractor returns and deductions. We check the payment records, prepare the calculations and handle the filings. Under-deducted tax can fall to the contractor, with interest and penalties where applicable.

Verify before paying. We use the subcontractor's registered details, record HMRC's reference and rate, and check whether returning subcontractors need reverification. Employment status must be considered separately.
Calculate the payment. We check invoices, direct materials and hired-plant costs, apply the HMRC rate to the correct balance and reconcile the amount paid.
File the monthly return. We report payments, including gross payments, for each tax month from the 6th to the 5th. Returns reach HMRC by the following 19th; quiet months need a nil return or an appropriate inactivity request.
Issue statements and reconcile. We prepare payment and deduction statements by the 19th after the tax month ends and reconcile returns and deductions with the amounts paid to HMRC.

A monthly electronic payment to HMRC is normally due by the 22nd, or the 19th if paying by post. Eligible contractors can pay quarterly; CIS returns remain monthly. Late-return penalties start at £100, with further charges if the return remains outstanding.

If your business has CIS deducted

We match each contractor's payment and deduction statement to your invoices and bank receipts. Missing statements and differences need resolving so the claim reflects the deductions you have suffered.

Limited companies

We report the cumulative deductions for the tax year through an Employer Payment Summary (EPS), alongside the normal payroll Full Payment Submission (FPS) where required. HMRC credits them against the company's Pay As You Earn (PAYE), National Insurance and CIS deductions payable as a contractor.

Unused amounts carry forward to later payment periods in the same tax year. After 5 April, we reconcile the remaining surplus for a repayment claim. Deductions are not claimed through the Corporation Tax return.

Sole traders and individual partners

We record income before CIS deductions, claim the deductions through Self Assessment and work out the balance of Income Tax and National Insurance. For a partnership, the deductions are allocated to the partners. A refund depends on the final liability and other amounts owed to HMRC.

Claiming a company's remaining CIS credit

Before a year-end repayment claim, HMRC requires the relevant payroll submissions, contractor CIS returns and Company Tax returns to have been submitted. HMRC first uses the credit against overdue PAYE or Corporation Tax. Any balance can be refunded or, on request, put towards VAT or an upcoming Corporation Tax bill. That is a repayment allocation, not an offset entered on the Corporation Tax return.

A claim before the tax year ends is available only where the business has stopped trading or deductions were taken after it moved to gross payment status. We check eligibility and reconcile the statements and bank records before claiming. HMRC decides the claim and may request further evidence.

What we need from you

We agree when you will send the records so there is time to resolve questions before a payment or filing deadline.

Business and subcontractor details: registered names, Unique Taxpayer References (UTRs), your employer and Accounts Office references, and company numbers or National Insurance details as appropriate.
Invoices and payment records: amounts and dates paid, credit notes, retention releases and the direct materials or third-party plant-hire invoices supporting each deduction calculation.
Deductions suffered: contractor statements, sales invoices, bank receipts and payroll/EPS records for the tax year to date.
VAT records: registration details, sales and purchase invoices, and any written end-user or intermediary-supplier notifications.

The records we prepare

For contractor work, you have a verification record, deduction calculations, the submitted monthly return and payment and deduction statements. For deductions suffered, you have a reconciliation showing the amounts claimed, used against tax and still available.

We review invoice VAT treatment alongside those records and identify the amounts due and the relevant deadlines. Where there is a repayment or gross-payment application, the supporting records show how the figures were reached.

Contractor CIS records must be kept for at least three years after the end of the tax year they relate to. Longer retention may be needed for the underlying company or tax records.

How the CIS deduction is calculated

Start with the contract payment and exclude VAT charged by a VAT-registered subcontractor. Then remove qualifying costs that the subcontractor has directly paid for that contract. These can include materials, consumables, fuel other than travelling fuel, third-party plant hire and qualifying manufacturing or prefabrication costs.

Use the subcontractor's actual cost, not the amount they mark up and charge you. For a VAT-registered subcontractor, exclude recoverable VAT from those costs; for one who is not VAT-registered, include the VAT they paid. Check invoices or receipts and keep the evidence.

A charge for using the subcontractor's own plant cannot be treated as hired-plant cost, although qualifying fuel and consumables may be allowed. Travel, subsistence and profit also remain in the deduction calculation. A separate supply of plant without an operator is outside CIS; plant supplied with an operator needs checking as construction work.

Example: materials charged above cost

A registered subcontractor invoices £6,000 before VAT. This includes £1,500 for materials that cost £1,200 and £400 for plant hired from a third party. The costs are evidenced and exclude recoverable VAT.

Payment before VAT: £6,000
Qualifying direct costs: £1,600
Amount subject to CIS: £4,400
CIS deducted at 20%: £880

The £300 materials mark-up stays in the calculation. The subcontractor receives £5,120, plus any VAT charged under normal VAT rules. If the construction reverse charge applies, no VAT is paid to the subcontractor.

Gross payment status

Gross payment status: applying for it, keeping it

Gross payment status means your customers pay without withholding CIS tax. It improves the timing of your cash receipts, but it does not reduce the tax due. You still need to set money aside for the normal payment deadlines. We prepare applications and review the records needed to retain the status.

Business test

You carry out construction work in the UK, or supply labour for it, and run the business through a bank account. We check the trading records and bank evidence before the application.

Turnover test

Net construction turnover excludes VAT and materials and is measured over the previous 12 months. The usual thresholds are £30,000 for a sole trader; £30,000 per partner or £100,000 for a partnership; and £30,000 per relevant person or £100,000 for a company. For a close company, count beneficial shareholders as well as directors, without counting the same person twice. We check any alternative test or group exemption that applies.

Compliance test

HMRC checks the applicable tax obligations over the previous 12 months, including CIS, PAYE and VAT. Limited late-filing and late-payment tolerances apply, and reasonable excuses can matter. A single failure does not invariably mean cancellation. We check the compliance record and any HMRC correspondence.

HMRC reviews the status annually. For a company, the review concerns the company itself. In the normal annual-review process, HMRC gives reasons, allows a response and, if it withdraws status, provides an appeal route. Withdrawal means customers start making deductions again. We track filing and payment dates and help resolve issues raised in the review; the decision remains with HMRC.

Construction invoices

CIS and the VAT domestic reverse charge

The domestic reverse charge (DRC) changes who accounts for VAT. It applies to qualifying standard- or reduced-rated construction services between UK VAT-registered businesses where the payment is reportable under CIS, subject to the customer checks. Gross payment status does not itself remove the reverse charge.

If you supply the work

Your invoice must identify the reverse charge and show the VAT amount or rate, without adding that VAT to the amount payable. Include the net sale in box 6 of your VAT Return, with no output VAT for that sale in box 1.

If you buy the work

Account for output VAT in box 1 and put the net purchase in box 7, not box 6. Claim input VAT in box 4 only to the extent the normal recovery rules allow. Partial exemption or non-business use can restrict recovery, so the entries do not always cancel out.

We coordinate the CIS work and the VAT treatment so the two regimes stay consistent. The DRC is covered in detail in our Domestic Reverse Charge guide, with the wider CIS rules set out in our CIS guide.

Checks before applying the reverse charge

Work and VAT rate. Check the supply is reportable under CIS and standard- or reduced-rated. Zero-rated work is excluded. Materials supplied with qualifying construction services follow the VAT treatment of that supply, even though CIS has separate materials rules.
Customer details. Check the customer's VAT registration, CIS status and whether they are making an onward supply of the construction services. A private householder is outside the reverse charge.
End-user notification. An end user consumes the construction services rather than reselling them. A qualifying intermediary supplier resupplies to a connected or linked end user, for example within a corporate group or a qualifying landlord/tenant relationship. Written notification allows the supplier to apply normal VAT rules.
Excluded supplies. Separate materials-only sales, employment-business supplies of staff, and professional services such as an architect's design work fall outside these rules. Artistic works, signwriting and oil or gas drilling are also excluded when supplied on their own. Mixed contracts need a separate check.

We check the evidence, help with end-user wording and configure the invoice treatment. We also check the VAT tax point: CIS payment dates and VAT reporting dates do not always coincide.

Common questions

CIS frequently asked questions

Verification, filing dates, gross payment status and VAT

What is the Construction Industry Scheme?

The Construction Industry Scheme (CIS) governs payments for construction work in the UK. Contractors verify subcontractors, deduct tax where HMRC requires it, report payments and pass deductions to HMRC. Building, alterations, demolition, civil engineering, installation, repair, painting and decorating are among the activities covered. A business can be both a contractor and a subcontractor. The deductions are advance tax payments; how they are credited depends on the subcontractor's business structure.

What are the CIS deduction rates?

HMRC confirms whether to pay gross at 0%, deduct at the registered rate of 20%, or use 30% for an unregistered or unverified subcontractor. First remove VAT charged and qualifying costs directly paid by that subcontractor, including materials and third-party plant hire. Apply the rate to the balance. Materials mark-ups and charges for using the subcontractor's own plant remain subject to deduction.

Do I have to verify every subcontractor?

Verify a new subcontractor before the first payment. Verify a returning subcontractor again if you have not included them on a CIS return in the current tax year or either of the previous two tax years. Use the rate HMRC gives you and act on subsequent rate-change notices. Keep the verification reference with the payment records. Verification does not establish that a worker is self-employed.

When are CIS300 returns due?

The monthly CIS return, often called CIS300, covers payments from the 6th to the following 5th and is due by the 19th after that period ends. For example, payments from 6 May to 5 June are reported by 19 June. Include payments made gross as well as those with deductions. If there are no payments, file a nil return or make an inactivity request where you have temporarily stopped using subcontractors. Payment and deduction statements are also due by the 19th.

What is gross payment status and how do you apply for it?

Gross payment status allows payment without CIS deductions; tax is still due on the normal timetable. HMRC checks the business, turnover and compliance tests. Net construction turnover over the previous 12 months must normally reach £30,000 for a sole trader, £30,000 per partner or relevant company person, or the £100,000 alternative for a partnership or company. Relevant company people include directors and, for a close company, beneficial shareholders. We check which test applies, prepare the evidence and help with the application and subsequent compliance reviews.

How does CIS interact with VAT and the Domestic Reverse Charge?

The construction domestic reverse charge applies to qualifying standard- or reduced-rated construction services between UK VAT-registered businesses where the payment is reportable under CIS, subject to the customer and supply checks. The supplier includes the net sale in VAT box 6, with no output VAT in box 1. The customer accounts for VAT in box 1 and the net purchase in box 7, with box 4 recovery only to the extent allowed by the normal input-tax rules. End users and qualifying intermediary suppliers can notify their supplier in writing so normal VAT rules apply.

What happens at the end of the tax year?

We reconcile contractor returns, statements and payments to HMRC. For a company receiving CIS deductions, we reconcile the amounts already reported through payroll Employer Payment Summaries and establish any surplus for a repayment claim. Company deductions must not be claimed through the Corporation Tax return. Sole traders and individual partners claim their deductions through Self Assessment. The final calculation shows any further tax due or refund to claim.

Keep reading

Service

Payroll & Pensions

PAYE, RTI, statutory pay and Auto-enrolment for the employee side of a mixed construction firm.

Service

VAT Returns

Quarterly returns with the Domestic Reverse Charge applied correctly across the supply chain.

Guide

CIS Guide

The Construction Industry Scheme rules, from registration to year-end reconciliation.

Official HMRC guidance

These sources explain the deduction, reporting and VAT rules used on this page. Checked on 7 September 2026.

Discuss the CIS work your business needs

Tell us whether you pay subcontractors, receive payments with CIS deducted, or do both. We can then discuss your records, the next filing date and any deductions still to reclaim.