CIS can affect cash flow quickly. Contractors need to verify subcontractors, make the correct deductions, give statements and file monthly returns. Subcontractors need to track deductions so tax records are complete.
Who CIS affects
The Construction Industry Scheme applies to many payments made by contractors to subcontractors for construction work. Contractors have obligations to verify subcontractors, apply the correct deduction status and report payments to HMRC.
Subcontractors should also keep records of invoices, payment statements and CIS deductions because these deductions usually count towards their tax position.
CIS monthly returns
Contractors usually need to send a CIS return every month showing payments made to subcontractors, whether paid gross or with deductions. GOV.UK guidance states that contractors must make monthly returns to HMRC showing payments made to subcontractors.
The monthly CIS return deadline is generally the 19th of the month after the tax month covered by the return. Late returns can lead to penalties.
CIS deduction rates
GOV.UK states that CIS deductions are normally 20% for registered subcontractors, 30% for unregistered subcontractors and 0% where the subcontractor has gross payment status.
Contractors should verify subcontractors before making payments and should not guess the rate. Subcontractors who are suffering 30% deductions may need to check whether they are correctly registered.
Payment and deduction statements
Where deductions are made, subcontractors should receive payment and deduction statements. These records help support the subcontractor’s tax return or company tax position and help identify missing or incorrect deductions.
Statements should be kept with invoices and bank records so that the bookkeeping agrees to the CIS position.
Records to keep for CIS
A good CIS process keeps subcontractor verification details, invoices, materials split, labour amounts, deduction calculations, payment dates, deduction statements, monthly returns and HMRC payment records.
How digital bookkeeping helps CIS clients
Digital bookkeeping is especially useful for CIS businesses because it can connect invoices, deductions, bank receipts, VAT treatment and monthly reporting. This helps contractors and subcontractors understand what has been deducted, what is owed and what has already been paid.
Durja Associates supports construction clients with CIS returns, bookkeeping and wider accounts support so CIS does not become a last minute monthly problem.
Official references
Last reviewed: May 2026. This guide is based on current GOV.UK guidance. CIS rules and administrative requirements can change, so check HMRC guidance for your exact position.
GOV.UK: CIS guide for contractors and subcontractorsGOV.UK: make deductions and pay subcontractorsGOV.UK: CIS subcontractor overview