CIS Accounting for London Contractors and Subcontractors: A Complete Guide

For London's construction businesses, the Construction Industry Scheme (CIS) is one of the biggest ongoing compliance headaches. Between verifying subcontractors, applying the right deduction rates and filing a return every single month, it is easy to slip up — and the penalties add up fast. This guide explains how CIS works for contractors and subcontractors, and how specialist accounting takes the pressure off.

What is the Construction Industry Scheme?

The CIS is HMRC's system for handling tax on payments between contractors and subcontractors in the construction sector. Under it, contractors deduct money from a subcontractor's payments and pass it to HMRC as an advance towards that subcontractor's tax and National Insurance. If you pay subcontractors for construction work, or you are paid for it, CIS almost certainly applies to you.

Contractor, subcontractor — or both?

You are a contractor if you pay subcontractors for construction work, and a subcontractor if you carry out the work for others. Many London businesses are both, which means registering under CIS in two capacities and keeping the paperwork straight for each.

CIS deduction rates

The amount deducted from a subcontractor's payment depends on their status with HMRC:

• 20% for subcontractors registered with HMRC under CIS

• 30% for those who are not registered or cannot be verified

• 0% for subcontractors who hold gross payment status

Verifying each subcontractor with HMRC before you pay them is what keeps you on the correct rate and out of trouble.

Monthly CIS returns and deadlines

Contractors must file a CIS return every month, due by the 19th, covering all payments made to subcontractors in the previous tax month. You have to file even in months when you have paid no one — a 'nil return'. Miss the deadline and penalties start at £100 and climb the longer the return is outstanding.

Don't forget the VAT reverse charge

Since 2021, most CIS-registered construction services fall under the VAT domestic reverse charge, which shifts responsibility for accounting for VAT from the supplier to the customer. It changes how you invoice and how you complete your VAT returns, and it is a common source of errors when accounting software is not set up correctly.

How BES Accountancy helps London construction businesses

We handle CIS end to end for contractors and subcontractors across London — registration, monthly returns, subcontractor verification, deduction statements, CIS payroll and the VAT reverse charge — all on Xero or QuickBooks and all for a fixed monthly fee. That means no missed deadlines, the right deductions every time, and more time for you to spend on site rather than buried in paperwork.

If CIS is eating into your evenings, we can help. Call BES Accountancy on 0333 224 4111 or request a free quote, and let a specialist London construction accountant take it off your plate.