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by

Björgvin Vigfússon

Developers: are you a contractor under CIS?

Short answer: If your business model is developing, converting or substantially renovating property, HMRC treats you as a mainstream contractor so you must operate the Construction Industry Scheme (CIS). Property investors/landlords are not mainstream, but once your rolling 12-month construction spend tops £3 million, you become a deemed contractor and CIS applies from that date. GOV.UK

What makes a developer a CIS contractor?

  • Mainstream contractors include property developers/speculative builders whose activity is the creation, renovation or conversion of buildings (or other civil engineering works). If that’s your core activity, you’re in CIS by default. GOV.UK
  • Deemed contractors are non-construction businesses (e.g. investors, charities, corporates) that cross £3 million of construction expenditure in any rolling 12 months, you must monitor spend and register from the date you pass the threshold. GOV.UK

→ Next read: Deemed contractor rule explained: calculating the £3m spend and when it bites (with a rolling-spend tracker).

If CIS applies, what do you actually have to do?

  1. Register as a CIS contractor (and as a subcontractor too if you’re paid by others). See HMRC’s CIS340 guide. GOV.UK
  2. Verify each subcontractor with HMRC before first payment (or if not used in the current/last 2 tax years). HMRC will confirm if you must deduct at 20%, 30%, or 0% (Gross Payment Status). GOV.UK
  3. Deduct from the labour element only — exclude materials, eligible plant hire, certain fuel/consumables and VAT. GOV.UK
  4. File your CIS monthly return by the 19th of the month following the tax month (which runs 6th→5th). GOV.UK
  5. Pay CIS deductions to HMRC by the 22nd if paying electronically (19th if by post/cheque). GOV.UK

Penalties escalate: £100 (1 day late), £200 (2 months), and at 6 & 12 months a further £300 or 5% of the liability (whichever is higher). GOV.UK
Status warning: CIS is not an employment-status decision. You still need to assess PAYE status (use HMRC’s CEST tool). GOV.UK

→ Clarifier: CIS isn’t employment status: getting PAYE vs subcontractor right

Developer vs investor: a quick self-check

  • Building/renovating/converting to sell or profit? You’re a mainstream contractor — operate CIS. GOV.UK
  • Primarily an investor/landlord doing major works? Track monthly spend; if your rolling 12-month total exceeds £3 million, you’re a deemed contractor — register and operate CIS from that date. GOV.UK

→ Deep dive: Deemed contractor rule explained: calculating the £3m spend and when it bites

CIS + VAT Domestic Reverse Charge (DRC): do both apply?

For most B2B supplies of building and construction services within CIS, VAT is reverse-charged: your supplier invoices without VAT, and you (the customer) account for VAT instead. Check scope/exclusions (e.g., end users, intermediary suppliers) in HMRC guidance. GOV.UK

→ Pair with: CIS vs VAT Domestic Reverse Charge: when both apply (invoice wording & software coding examples).

Should you aim for Gross Payment Status (GPS)?

  • What GPS does: Subcontractors are paid gross (0%) — better cash flow; you still file and pay the right tax. GOV.UK
  • How to qualify/keep it: HMRC tests business, turnover and compliance; GPS is reviewed and can be withdrawn if tests aren’t met (with appeal rights). (See CIS notes and GOV.UK GPS guidance.) GOV.UK

→ Read next: How to qualify for (and keep) CIS Gross Payment Status in 2025/26 (includes our GPS Readiness Check CTA).

Doing CIS inside your software (so it’s done right, on time)

Most mainstream UK platforms support CIS: verification, labour/material splits, statements and HMRC filing.

  • Xero — CIS returns & statements.
  • QuickBooks — CIS centre and DRC support (help article kept current).
  • Sage — CIS modules for reporting/returns.

→ Walkthrough: CIS returns & statements in Xero/QuickBooks/Sage (screen-by-screen with pitfalls).

Costly mistakes we see (and how to avoid them)

  1. Mixing up CIS with PAYE status. Do a status check first (CEST); only apply CIS when the engagement is genuinely subcontracted. GOV.UK
    → Clarifier: CIS isn’t employment status: getting PAYE vs subcontractor right
  2. Over-deducting by including materials/plant/VAT in the CIS base. Deduct from labour only as HMRC sets out. GOV.UK
    → Fix it fast: CIS invoice anatomy: labour vs materials (with worked examples)
  3. Missing the 19th/22nd cadence returns by the 19th, payments by the 22nd (electronic). Penalties rack up quickly. GOV.UK
    → More detail: CIS penalties & appeals (and how to protect or reinstate GPS)
  4. Not monitoring the £3 million threshold — investors who tip over become deemed contractors. Put a rolling tracker in place. GOV.UK
    → Read: Deemed contractor rule explained: calculating the £3m spend and when it bites
  5. Ignoring VAT DRC when CIS applies — get the wording/coding right. GOV.UK
    → See: CIS vs VAT Domestic Reverse Charge: when both apply

Your CIS checklist for developers (quick version)

  • Decide developer vs investor; if investor, monitor rolling spend vs £3 million. GOV.UK
  • Register for CIS (keep CIS340 handy). GOV.UK
  • Verify subcontractors; apply the correct 0% / 20% / 30% rate. GOV.UK
  • Split invoices correctly (labour vs materials/plant/fuel/VAT). GOV.UK
  • Issue statements, file CIS300 by the 19th, pay by the 22nd (electronic). GOV.UK
  • Assess employment status (CEST). GOV.UK
  • Consider GPS for cash flow — keep compliance tight. GOV.UK

→ Free resource: CIS setup checklist for developers (PDF) brief your site manager & bookkeeper in one page.

Helpful GOV.UK links used in this article

  • Mainstream contractors (inc. property developers/spec builders) — HMRC internal manual. GOV.UK+1
  • Deemed contractors — £3 million rolling 12-month test — HMRC manuals. GOV.UK
  • CIS340 (official guidance booklet). GOV.UK
  • Verify subcontractors and deduction rates (0/20/30) — GOV.UK guidance. GOV.UK+1
  • Monthly return deadline (19th) and payment deadline (22nd electronic/19th post). GOV.UK+1
  • Penalty ladder for late returns. GOV.UK
  • CEST (Check Employment Status for Tax) tool. GOV.UK
  • VAT Domestic Reverse Charge — when it applies & the technical guide. GOV.UK+1

Next steps

Want this airtight (and cash-flow friendly)?
Book a 20-minute CIS setup & risk review. We’ll confirm whether you’re mainstream or deemed, set your verification & deduction workflow, map DRC VAT edge-cases, and line up GPS if you qualify, so you keep more of what you earn.