The Construction Industry Scheme (CIS) is a mandatory withholding tax where either 20% or 30% is deducted from a self-employed construction subcontractor's payments and paid directly to HM Revenue and Customs on their behalf. The deductions serve as advance payments towards the subcontractor’s annual income tax, spreading some of their tax liabilities over the financial year instead of accruing an end-of-year tax burden. Under the CIS scheme, most subcontractors will have no income tax to pay at the end of the year, and many will get a tax rebate after claiming expenses back against the tax they have already paid.
Any business or individual who pays subcontractors for construction work is classed as a contractor under CIS and must register as a contractor with HMRC. Contractors must register before any construction work begins. A subcontractor is anyone who does construction work for a contractor. While subcontractors do not have to register with HMRC, doing so will reduce their mandatory tax deductions from 30% to 20%.

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