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The construction industry scheme (CIS) was devised to limit the amount of tax lost as a result of under-declarations or failures to notify chargeability by subcontractors, many of whom came to work in the UK for relatively short periods without paying any tax.

The scheme operates to withhold tax at source at the point of payment, thereby reducing the risk of a subsequent default by the subcontractor. Although, if the subcontractor can prove he has complied with his tax obligations he is able to receive payments gross.

The scheme has undergone regular changes since its inception. The current regime came into effect on 6 April 2007.

This guidance note considers the penalty regime for inaccurate returns. For details on penalties for late filing of CIS returns and late payment of tax, see the CIS - penalties for late payment, returns or incorrect registration guidance note.

CIS returns are discussed in more detail in the CIS ― compliance guidance note.

For a summary of the CIS, see the CIS ―