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HMRC internal manual

Construction Industry Scheme Reform Manual

The Scheme: overview: legislation

The Construction Industry Scheme legislation provides, from 6 April 2007, for the taxation of certain payments made by contractors to subcontractors in the construction industry. The purpose of the Scheme is to limit the evasion of tax by subcontractors, all of whom should register with HMRC if they want to be paid without having a deduction at the higher rate made from their payments.

The statutory authorities for these arrangements are contained in

  • FA04/S57-77 and FA04/SCH11 and 12, and
  • SI2005/2045.


The main change under the new Scheme that started on 6 April 2007 is the removal of the following documents

  • registration cards - CIS4(P) and CIS4(T)
  • tax certificates - CIS5, CIS5(Partner) and CIS6, and
  • vouchers - CIS23, CIS24 and CIS25.


Instead, subcontractors engaged in construction operations in the UK need to register with HMRC to be paid under deduction at the standard rate or, where the subcontractor meets the conditions under the statutory tests, to be paid gross, that is without any deductions being made from their payments.

Like the Scheme it replaces, the new Scheme only permits gross payment to those applicants who

  • pass the business test
  • have a turnover above a certain level (see CISR44000 onwards for details of the Turnover Test), and
  • are able to pass the compliance requirements (See CISR46000 onwards for details of the compliance test).


The introduction of a new monthly return for completion by contractors replaces the old voucher system. See CISR60000 onwards for more details of the monthly return.

The legislation applies only where there is a contract between a contractor and a subcontractor that is not a contract of employment. Where a contract of employment exists, the subcontractor is an employee and will continue to be liable to tax on employment income through the PAYE system.

When giving advice to contractors on the operation of the Scheme, the question of whether an individual is an employee of the contractor should not be overlooked.

You should initially refer the contractor to the HMRC factsheet ES/FS1 ‘Are your workers employed or self employed for Tax and National Insurance contributions’ available from the GOV.UK website, containing general guidance on employment status. More detailed advice for contractors is also  available on the HMRC website at

A section dedicated to the legislative background for CIS can be found at CISR16000 onwards for the primary legislation and at CISR17000 onwards for the secondary legislation (the Regulations).