The Construction Industry Scheme or CIS has been established with the primary purpose of preventing any tax avoidance among the members of the construction industry. With this scheme, payments that have been made to the subcontractors by the contractors will only be made after the tax has been deducted from the source. It means that the subcontractors will only be paying their tax once they have earned it, in the same way with those of employees that are being taxed through PAYE. Even though CIs is kind of straight forward, still, there are some aspects of this scheme that call for clarification, primarily as to how “construction” is defined by HMRC and what kinds of businesses can be considered as eligible for the Construction Industry Scheme.

Construction Defined

Under the rules of CIS, construction is broadly defined as:

  • Making
  • Building
  • Putting together
  • Assembling

Such activities can apply both to temporary and permanent structures and buildings as well as to civil engineering projects.

With this broad definition, the HMRC hopes to cover almost all construction-related activities as much as possible, which will then encompass the more apparent building operations including:

  • Electrical work and plumbing
  • General building such as plastering, roofing, and bricklaying
  • Site preparation and groundworks

The less obvious activities are also included, such as:

  • Decorating and painting
  • Repairs and general maintenance
  • Putting up scaffold
  • Dismantling work and demolition
  • Extensions to existing structure
  • Assembling of site facilities and off and on site fabricated united
  • Tree planting if done as part of new housing project and landscaping


All types of businesses, including limited companies, partnerships, and self-employed individuals that engage in construction activities that have been outlined above can be eligible for the Construction Industry Scheme.

Businesses that fall in this scheme are being classified as either:

  • Subcontractors
  • Contractors
  • Subcontractors and contractors

Professional Work

The Construction Industry Scheme excludes professional work done by individuals like surveyors, building inspectors and architects whether off or on site. But, once the role has moved away from advisory or consultative, life when the architect becomes the main contractor, this activity will then fall under the CIS rules.


The most recognizable contractors are those medium to large building firms and construction companies. These companies usually subcontract trades like carpenters, bricklayers and others in order to complete the building projects and if necessary. Remember that CIS will not apply to employees being taxed under PAYE.

Less recognizable contractors include management services and property developers, local government agencies and housing associations. Even though these businesses that are called deemed contractors may not have construction as their main activity, once they spent an average of £1 million or above on the construction during a 3-year period, the Construction Industry Scheme will classify them as contractors, which means that they need to adhere to the rules on registration as well as other obligations of contractors.

Private householders, however, are not considered as contractors under the scheme, no matter the amount that will be spent on construction work.


All businesses, whether limited company, partnership or individual, which undertake construction projects for contractors, will be classified as subcontractors.  Subcontractors have to register with the CIS for them to avoid a higher tax rate of 30% deducted by the contractor. In general, majority of subcontractors that are registered under the CIS are going to pay 20% tax even though it is possible to get gross payment once specific requirements have been met.