We verify subcontractors before the first payment, file CIS300 returns on time, issue payment and deduction statements, and help protect Gross Payment Status by keeping the wider compliance record in good order. Construction VAT and the Domestic Reverse Charge are reviewed alongside the CIS work, so both areas are treated consistently.
Discuss your CIS setup
CIS deduction rates
Deductions apply to the labour element only. Materials, plant hire and CIS-exempt charges are paid gross. We confirm the split before each subcontractor payment goes out.
The reporting burden, and the consequences of getting it wrong, sit with the contractor. If a subcontractor is paid without verification, or with the wrong deduction rate, HMRC pursues the contractor for the under-deducted amount, plus interest and penalties. The same goes for late or missed CIS300 returns: a single forgotten month triggers an automatic £100 penalty, with the figure escalating quickly the longer the return is outstanding.
We handle the contractor side of the regime for you. Each subcontractor is verified with HMRC before the first payment. The deduction is calculated on the labour element only, with materials, plant hire and CIS-exempt costs paid gross. Statements go out to subcontractors after each payment so they have the evidence for their own return. The CIS300 return is filed by the 19th of the following month when there is a return to submit, including a nil return if required.
On the subcontractor side, the deductions suffered through the year are set against your Corporation Tax bill at year-end (for limited companies) or your Self Assessment Income Tax bill (for sole traders and partnerships). Where the deductions exceed the liability, the balance is refunded. We run the reconciliation as part of year-end so the deductions are never lost or double-counted.
UTR check with HMRC before the first payment, with the verification result and reference logged against the subcontractor record.
Filed by the 19th of the following month, with a nil return on quiet months so the automatic penalty does not trigger.
Issued to each subcontractor after their payment, so they have the evidence for their own Self Assessment or Corporation Tax return.
Deductions suffered as a subcontractor are set against the year-end Corporation Tax or Self Assessment bill, with any refund position recovered from HMRC.
Gross payment status changes the cashflow shape of a construction business. Instead of CIS deductions sitting with HMRC for months, the full invoice value lands in the bank, and the tax position is settled through the year-end accounts. The trade-off is a strict compliance test: HMRC reviews the status, and a slipped filing or an overdue tax payment can put it at risk.
The work is run as a genuine construction business in the UK, paid through a UK bank account, with clear records. The bar is low for an established business, but slips on this test catch out new entrants and recently incorporated trades.
Net construction turnover (excluding VAT and materials) of at least £30,000 per partner or director in the previous twelve months, with a £100,000 partnership-level alternative for larger firms. We confirm the figure from the management accounts before the application goes in.
All tax returns and payments up to date for the twelve months before the application, and kept up to date afterwards. CIS300 returns, VAT returns, PAYE filings, Corporation Tax, Self Assessment: HMRC's review covers all of them, not just construction filings.
Once granted, gross payment status is reviewed by HMRC against the rolling twelve-month compliance record. A run of late returns or unpaid tax can trigger a withdrawal letter, and reapplying takes time. We protect the status by keeping the wider compliance record clean: CIS300, quarterly VAT, RTI on or before payday, and Corporation Tax paid by the deadline.
The Domestic Reverse Charge (DRC) for construction services has been in force since 2021 and is one of the regular sources of VAT mismatches in the sector. For VAT-registered businesses, where the work falls within CIS, the customer is VAT-registered, and the customer is not the end client, the subcontractor does not charge VAT on the invoice. Instead the contractor accounts for the VAT on both sides of its own return.
In practice, the wording on the invoice has to flag the reverse charge, the subcontractor's box-6 turnover figure has to exclude the DRC sales, and the contractor's return has to recognise both the input and output tax in the same period. Getting any one of those wrong creates a mismatch that the next return makes visible.
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.
The DRC in three checks
A short end-user statement from the contractor protects the subcontractor's VAT position. We draft the wording during onboarding and bake it into the invoice template.
Verifications, returns, gross payment status, and the DRC overlap
The Construction Industry Scheme (CIS) is HMRC's tax-deduction regime for the construction sector. Contractors deduct money from payments to subcontractors and pass it to HMRC as an advance toward the subcontractor's eventual Income Tax and National Insurance bill. The scheme covers most construction operations on UK land, building, alterations, demolition, civil engineering, installation, repair, painting, decorating, and applies whether the work is for a private, commercial or public client.
There are three rates. 0% (gross payment status) applies if the subcontractor has been registered for gross payment by HMRC and meets the business, turnover and compliance tests. 20% (standard rate) applies to subcontractors who are registered for CIS but not for gross payment. 30% (higher rate) applies to subcontractors who are not registered for CIS at all, or who cannot be verified. The deduction is taken from the labour element only, never from materials.
Yes, before the first payment. Verification is done through HMRC and tells you whether to deduct at 0%, 20% or 30%. If you skip verification and assume the subcontractor is registered, HMRC can charge you the under-deducted tax personally as the contractor, plus interest and penalties. Verification only needs to be repeated if a subcontractor has not been included on a return for two complete tax years.
Monthly. The CIS300 return covers payments made to subcontractors in the tax month ending on the 5th, and it is due by the 19th of the following month. A nil return is required for any month where you are an active contractor but have made no payments, otherwise HMRC issues an automatic £100 penalty for non-filing. Penalties escalate the longer the return is outstanding.
Gross payment status lets contractors pay you without deducting CIS, so the full invoice value lands in the bank and the tax position is settled through your year-end accounts instead. To qualify HMRC applies three tests: a business test (the work is run as a construction business through a UK bank account), a turnover test (net construction turnover above the threshold per partner or director, currently £30,000 each, with a £100,000 partnership-level alternative), and a compliance test (returns and tax payments up to date for the previous twelve months). We help prepare the application, evidence the compliance record, and protect the status once granted by keeping the underlying filings clean.
For VAT-registered contractors and subcontractors, the Domestic Reverse Charge (DRC) shifts who accounts for VAT on most construction services. Instead of the subcontractor charging VAT to the contractor, the contractor accounts for both the input and output VAT on its own return. The DRC applies where the work falls within CIS, the customer is VAT-registered and is not the end client, and both parties are within the construction supply chain. Getting the invoice wording wrong is one of the most common VAT errors in the sector. We coordinate the CIS work and the VAT treatment so the two are consistent.
Two things. As a contractor, you reconcile the deductions you have made and reported through CIS300 returns against the payment and deduction statements issued to subcontractors. As a subcontractor, the CIS deductions suffered through the year are set against your own Corporation Tax (limited companies) or Self Assessment Income Tax bill (sole traders and partnerships). If the deductions exceed the liability, the balance is refunded by HMRC. We run the reconciliation and the offset as part of the year-end work, so deductions are never lost or double-counted.
PAYE, RTI, statutory pay and Auto-enrolment for the employee side of a mixed construction firm.
ServiceQuarterly returns with the Domestic Reverse Charge applied correctly across the supply chain.
GuideThe Construction Industry Scheme rules, from registration to year-end reconciliation.
Subcontractor verification before the first payment, CIS300 returns filed when due, deduction statements out as part of the same run, and gross payment status protected by keeping the wider compliance record clean.
Discuss your CIS setupCIS contractors & subcontractors for UK limited companies in South Yorkshire, the East Midlands and across the UK, with the work run through secure cloud records and scheduled calls.
