What is CIS and does it apply to me?

The Construction Industry Scheme requires contractors to deduct tax from payments to subcontractors and pay it to HMRC on their behalf. It applies if you pay subcontractors for construction work, and it applies whether you are a builder, a developer, or a business outside construction that spends heavily on it. Construction operations are defined broadly — site preparation, alterations, demolition, installation of systems, decorating, repairs — but there are carve-outs that surprise people, including architecture and surveying, carpet fitting, and manufacturing materials off site. If you are a subcontractor being paid for construction work, you are in it from the other side and will have deductions taken from your payments. Being registered matters: it is the difference between 20% and 30% coming off.

How much do I deduct from a subcontractor?

20% if they are registered with HMRC, 30% if they are not, and nothing at all if they hold gross payment status — but you do not choose which, you verify. Every new subcontractor must be verified with HMRC before their first payment, and HMRC tells you the rate to apply. Guessing is not an option: deduct 20% from someone HMRC would have told you to deduct 30% from and you owe the difference yourself. Crucially, the deduction applies only to the labour element. Materials, plant hire, and VAT are excluded, so an invoice of £5,000 labour plus £3,000 materials at 20% produces a £1,000 deduction, not £1,600. Subcontractors who do not itemise materials will have deductions taken from the whole amount, which is an expensive way to save typing.

When are CIS returns due and what happens if I am late?

Monthly, by the 19th of the month following the tax month, which runs from the 6th to the 5th. So the month ending 5 June is due by 19 June. The penalties are unusually harsh for how small the obligation feels: £100 the day you are late, £200 at two months, and then £300 or 5% of the deductions at six and twelve months. Those stack, and they are per return — a contractor who quietly stops filing for a year can accumulate thousands owing nothing in tax. You must file a nil return if you paid no subcontractors in a month, or tell HMRC you are inactive, because HMRC expects a return and penalises its absence rather than its content. That is where most CIS penalties come from.

How do I get my CIS deductions back?

It depends on your structure, and the difference is significant for cash flow. A sole trader or partner reclaims through Self Assessment: the deductions are credited against your tax bill, and because 20% of gross labour usually exceeds the tax actually due on the profit, most subcontractors end up owed a refund each year. Limited companies cannot do that. A company offsets CIS suffered against its own PAYE liabilities through the EPS each month, and only claims a repayment after the tax year end if a balance remains. This catches out subcontractors who incorporate: money that used to come back annually via your return now sits with HMRC until it can be offset, and a company with no payroll to offset against waits until April.

What is gross payment status and how do I get it?

Gross payment status means contractors pay you in full with no deduction, and you settle your tax through your return instead. For a subcontractor it transforms cash flow — instead of 20% of every payment sitting with HMRC until you reclaim it, you hold the money. To qualify you must pass three tests: a business test showing you run a genuine construction business through a bank account, a turnover test measured against thresholds that vary by structure, and a compliance test requiring that you have filed and paid everything on time in the last twelve months. The compliance test is the one that bites, and it applies continuously — HMRC reviews status annually and will withdraw it for a pattern of lateness. Losing it costs far more than the late return that triggered it.

Am I a deemed contractor even though I am not a builder?

Possibly, and this is the CIS trap that catches businesses who have never thought of themselves as construction. If your business is outside construction but your spend on construction operations exceeds £3 million in any rolling twelve-month period, you become a deemed contractor and must operate CIS on payments to subcontractors like any builder. It applies to property investors, large landlords, retailers doing a fit-out programme, manufacturers extending a site. The rolling twelve-month test means it can arrive unannounced during a big project. Once in, you must register, verify subcontractors, deduct, and file monthly returns, with the same £100-a-month penalties. There are exclusions for work on your own premises for your own use, which is where careful analysis pays.

What is the CIS reverse charge and how does it interact?

The VAT domestic reverse charge applies to construction services between VAT-registered businesses where the recipient is CIS-registered and is not the end user. The supplier does not charge VAT; the customer accounts for it instead. The two schemes overlap but are not the same — CIS is about income tax deducted from labour, the reverse charge is about VAT — and a supply can be within one and not the other. The practical effect on subcontractors is a cash flow hit: you no longer hold VAT between invoicing and your return, and many find themselves in a permanent repayment position, which is a good reason to switch to monthly VAT returns. The recurring dispute is whether your customer is an end user, and you want their confirmation in writing.

Do I have to give my subcontractors a statement?

Yes — a payment and deduction statement for every subcontractor you deducted from, within 14 days of the end of the tax month. It must show your details, theirs, the gross payment, the cost of materials, and the amount deducted. Subcontractors need it to prove what was taken, so failing to issue one leaves them unable to reclaim correctly and creates a dispute you will have to resolve later anyway. Gross payment status subcontractors need no statement, since nothing was deducted. Keep copies: if HMRC reviews your CIS operation, the statements are how you evidence what you did. Most software generates them from the return automatically, which is the easiest way to make sure it happens on time rather than when someone chases.

What CIS records do I need to keep?

Enough to reconstruct every payment and deduction: gross amounts, the materials element, the deduction, verification numbers for each subcontractor, and copies of the statements you issued. Keep them for at least three years after the end of the tax year, though we would keep them alongside your other records for the usual longer period, since HMRC compliance reviews on CIS are common and go back further than people expect. The material weakness we see most is the materials split — a contractor who cannot evidence why an invoice was treated as part labour and part materials will find HMRC treating the whole thing as labour and charging the deduction that should have been made, plus interest. Get the split onto the invoice, not into a conversation you half remember.

Does MTD change anything for CIS?

CIS itself is untouched — monthly returns, verification and deductions all work exactly as they do now, and MTD does not reach them. What changes is your own income reporting. If you are a self-employed subcontractor with qualifying income above the threshold, you are in MTD for Income Tax on the usual dates, so your trade goes into quarterly updates and a final declaration. The interaction worth knowing about is that CIS deductions suffered are credited at the final declaration, not through the quarterly updates, so the estimated tax figure your software shows during the year will look far too high if it ignores the 20% already taken from every payment. That surprises subcontractors, and it is why we set expectations before the first quarter rather than after it.

In this guide: Overview Benefits Process FAQs

CIS Support for Limited Company Web Designers: What You Need to Do (and What to Watch Out For)

Most web designers don’t expect to deal with the Construction Industry Scheme (CIS). But if your limited company takes on work connected to a construction project, CIS can crop up quickly — and HMRC take it seriously.

This guide explains CIS in plain English, with a focus on how it can affect limited company web design businesses, what you need to do each month, and where mistakes commonly happen.

What is CIS (in everyday terms)?

CIS is an HMRC scheme that applies to the construction industry. It’s designed to make sure tax is collected properly from contractors and subcontractors.

Under CIS, if a business is a contractor, it may need to:

Check and verify subcontractors with HMRC
Deduct CIS tax from some payments (usually 20% or 30%)
File a monthly CIS return
Give subcontractors payment and deduction statements
Pay the deducted amounts to HMRC on time

Even if you only have one subcontractor, or it’s only for one project, CIS obligations can still apply.

Why CIS can apply to web designers

CIS isn’t about your job title — it’s about the type of work and the type of project.

Web designers can get pulled into CIS when working on construction-related projects such as:

Building company websites where the contract sits with a main contractor
Digital signage or kiosk interfaces installed on a building site
UI/UX work for property developers where you’re contracted through a construction contractor
Ongoing site-based digital systems (for example, visitor management or booking systems) as part of a wider build

Sometimes CIS applies because your client is a contractor and they treat your work as part of the construction supply chain. Other times, CIS applies because your company becomes a contractor by paying subcontractors for construction operations.

Contractor vs subcontractor: which one are you?

If your limited company is being paid under CIS

If a construction contractor pays your limited company and deducts CIS from your invoice, your company is being treated as a subcontractor.

In practice, this means:

You invoice as normal
Your client deducts CIS tax and pays you the net amount
You receive a deduction statement showing what they withheld

Important: CIS deducted from payments to a limited company does not automatically reduce Corporation Tax. The deduction is usually set against PAYE liabilities (if applicable), or reclaimed through the company’s tax position. The exact treatment depends on your setup, so it’s worth getting it checked properly.

If your limited company pays others for construction work

If your company pays subcontractors for construction operations, your company may be a contractor for CIS purposes. That’s when the monthly CIS admin starts.

This is where many limited companies get caught out — they assume CIS is only for builders, then discover they should have been filing returns months ago.

Does CIS apply to “web work” at all?

Often, pure web design and digital marketing work is not classed as construction operations. However, CIS decisions can be messy in real life because contracts aren’t always clear, and some contractors apply CIS very widely to protect themselves.

What matters is:

What the contract says you’re supplying
Whether the work is part of a construction project
Whether the work is treated as part of the build or installation
How the client is categorising you

If a client insists on deducting CIS from your invoices, don’t ignore it. It’s a sign you need to confirm your position and make sure you’re handling the tax correctly.

Common CIS problems for limited company web designers

1) CIS deductions with no paperwork

You should receive a deduction statement showing the gross amount, materials (if relevant), and CIS deducted. Without that, it’s hard to prove what’s been withheld and to claim the right credit.

2) Cash flow surprises

If 20% is being withheld from invoices, it can create a sudden squeeze — especially if you’re used to being paid in full and then managing your own tax later.

3) Mixing up CIS and VAT

CIS is separate from VAT. If you’re VAT registered, VAT is still calculated as normal on the invoice. CIS is then applied according to the contractor’s rules. It’s easy to end up with invoices that don’t reconcile if the layout isn’t clear.

4) Not registering correctly

Depending on your role, you may need to register for CIS as a subcontractor and/or contractor. This isn’t optional if CIS applies — and late registration can cause delays and complications.

5) Missing monthly return deadlines (if you’re a contractor)

CIS returns are monthly. Even if you didn’t pay any subcontractors in a month, you may still need to submit a return (or a nil return) depending on your situation.

Late returns can trigger penalties, and they can stack up quickly.

What good CIS support looks like (and why it matters)

Proper CIS support isn’t just “filing a form”. It’s about keeping you compliant, reducing stress, and making sure the numbers end up in the right place.

For a limited company web designer, CIS support typically includes:

Confirming whether CIS should apply to your work (and documenting the position)
Registering you correctly with HMRC (contractor/subcontractor)
Checking subcontractors and applying the correct deduction rate (20%/30%/gross where allowed)
Preparing and submitting monthly CIS returns on time
Producing deduction statements for subcontractors
Making sure CIS deductions are reflected correctly in your bookkeeping and tax reporting
Helping you avoid penalties and messy HMRC queries later

Practical checklist: if CIS has appeared in your limited company

Ask for the CIS deduction statement for every payment where CIS is withheld
Check whether you’re registered correctly (subcontractor and/or contractor)
Review your invoices to ensure VAT and CIS are shown clearly
Keep a simple record of gross, CIS deducted, net received, and dates
Don’t wait until year-end — CIS issues are much easier to fix in real time

How we help at Tax Digital

At Tax Digital, we specialise in Making Tax Digital and day-to-day compliance, and we support limited companies who need CIS handled properly — without it taking over their working week.

If you’re a web designer running a limited company and CIS has come up (or you suspect it might), we can help you get clear on what applies, get registered correctly, and keep everything filed and paid on time.

Next step

If you’d like us to review your situation, it helps to have:

A recent invoice where CIS was deducted (if you have one)
Any CIS deduction statements you’ve received
A short description of the project and who the end client is

Once we’ve seen that, we can tell you what you need to do next — and what you can stop worrying about.

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CIS Support for Limited Company Web Designers: What You Need to Do (and What to Watch Out For)

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Service Overview

CIS Support for Limited Company Web Designers: What You Need to Do (and What to Watch Out For)

What is CIS (in everyday terms)?

Why CIS can apply to web designers

Contractor vs subcontractor: which one are you?

If your limited company is being paid under CIS

If your limited company pays others for construction work

Does CIS apply to “web work” at all?

Common CIS problems for limited company web designers

1) CIS deductions with no paperwork

2) Cash flow surprises

3) Mixing up CIS and VAT

4) Not registering correctly

5) Missing monthly return deadlines (if you’re a contractor)

What good CIS support looks like (and why it matters)

Practical checklist: if CIS has appeared in your limited company

How we help at Tax Digital

Next step

Why Choose Us?

How It Works

Audit

Strategy

Management

Frequently Asked Questions

Let's Get Your Taxes Sorted

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Which package is right for you?

Sole Traders

Landlords

Who we help

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★ Review

CIS Support for Limited Company Web Designers: What You Need to Do (and What to Watch Out For)

Get Started Today

Service Overview

CIS Support for Limited Company Web Designers: What You Need to Do (and What to Watch Out For)

What is CIS (in everyday terms)?

Why CIS can apply to web designers

Contractor vs subcontractor: which one are you?

If your limited company is being paid under CIS

If your limited company pays others for construction work

Does CIS apply to “web work” at all?

Common CIS problems for limited company web designers

1) CIS deductions with no paperwork

2) Cash flow surprises

3) Mixing up CIS and VAT

4) Not registering correctly

5) Missing monthly return deadlines (if you’re a contractor)

What good CIS support looks like (and why it matters)

Practical checklist: if CIS has appeared in your limited company

How we help at Tax Digital

Next step

Why Choose Us?

How It Works

Audit

Strategy

Management

Frequently Asked Questions

What is CIS and does it apply to me?

How much do I deduct from a subcontractor?

When are CIS returns due and what happens if I am late?

How do I get my CIS deductions back?

What is gross payment status and how do I get it?

Am I a deemed contractor even though I am not a builder?

What is the CIS reverse charge and how does it interact?

Do I have to give my subcontractors a statement?

What CIS records do I need to keep?

Does MTD change anything for CIS?

Let's Get Your Taxes Sorted

Speak to an Expert