Who Is Exempt from the CIS Scheme

Who Is Exempt from the CIS Scheme?

The Construction Industry Scheme (CIS) is a tax system set up by HMRC to regulate how contractors handle payments to subcontractors for construction work. Under CIS, contractors deduct tax from subcontractors' pay and pass it to HMRC. However, not everyone who works in or around construction is required to register or operate under the scheme.

In this article, we explain who is exempt from the CIS scheme, what types of work are excluded, and what businesses need to know to stay compliant while avoiding unnecessary deductions or registrations.

What Is the Construction Industry Scheme?

Before looking at exemptions, it’s helpful to understand how CIS works. Under the scheme:

• Contractors deduct a fixed percentage (usually 20 or 30 percent) from payments made to subcontractors

• These deductions are sent to HMRC and count as advance payments toward the subcontractor’s tax and National Insurance

• Subcontractors who are registered with HMRC receive deductions at the lower 20 percent rate

• Subcontractors who are not registered have 30 percent deducted

• Some subcontractors with gross payment status have no tax deducted

CIS applies to most construction work in the UK. However, some types of businesses and activities are exempt.

Who Is Exempt from the CIS Scheme?

There are three main categories of exemption:

1. Businesses That Are Not Contractors or Subcontractors

CIS only applies when payments are made from a contractor to a subcontractor for construction work.

You are not required to register for CIS if:

• You are a business that does not operate in construction and does not pay subcontractors for construction work

• You only use employees, not subcontractors, for your building or maintenance work

• You are a private homeowner having construction work carried out on your own home

Examples of exempt businesses include:

• A retailer refurbishing their own premises using employees

• A small café hiring a builder to fix a roof, with no subcontractor chain

• An office paying a maintenance team on PAYE terms rather than as subcontractors

In these cases, the business is a customer of construction services, not a contractor under CIS.

2. Certain Types of Work That Are Not Considered Construction

Even if you are involved in a project that looks like construction, your business may be exempt if your work does not fall under HMRC’s definition of construction operations.

Examples of excluded work under CIS include:

• Carpet fitting

• Manufacture or delivery of construction materials (as long as no installation is carried out)

• Scaffolding hire (without labour)

• Surveying and architecture

• Cleaning completed buildings (including industrial cleaning)

• Installing blinds or shutters

• Security systems installation (alarms, CCTV)

• Site clearance not involving construction or demolition

If your work is professional or purely supply-based, and you are not physically constructing or altering a building or structure, you are likely to be exempt from CIS.

3. Contractors Paying Less Than the CIS Threshold

If your business does not operate in construction but spends more than £3 million on construction work within a 12-month period, you must register as a contractor under CIS.

However, if you spend less than £3 million on construction in any rolling 12-month period, you are considered a de minimis contractor and do not need to register. This exemption is common among:

• Small businesses having occasional repair work done

• Charities with limited construction spending

• Offices or retailers managing low-value refurbishments

It’s important to monitor your spending. If your construction costs rise above £3 million, you must register within 30 days of passing the threshold.

Additional Situations That May Be Confused with Exemption

1. Employees:
CIS does not apply to employees. If someone is paid through PAYE with tax and National Insurance deducted by the employer, they are not a subcontractor and CIS does not apply.

2. Overseas Work:
CIS only applies to construction work in the UK. If the work is carried out entirely abroad, it is not subject to CIS.

3. Property Owners:
If you are a private individual having work done on your own home and you are not running a construction business, CIS does not apply to you.

What If You Are Not Sure?

If you’re unsure whether you fall under CIS, it’s a good idea to:

• Speak with your accountant or tax adviser

• Contact the HMRC CIS helpline: 0300 200 3210

• Check official guidance on the HMRC website

Applying CIS rules incorrectly can result in penalties, missed deductions or HMRC disputes. It’s always better to clarify your position early.

Final Thoughts

While the Construction Industry Scheme is mandatory for most contractors and subcontractors, not everyone is required to register. Businesses that don’t work in construction, use only employees, or carry out certain excluded activities may be exempt. Keeping accurate records of what work is being done and who is being paid will help you determine whether CIS applies.

Understanding the exemptions can save time, avoid unnecessary deductions and help you stay compliant with HMRC rules.