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Construction Industry Scheme: CIS 340


The Construction Industry Scheme (CIS) is a tax deduction scheme in the UK that applies to construction work. It is designed to prevent tax evasion and ensure that subcontractors in the construction industry pay the correct amount of tax. CIS 340 refers to the legislation and regulations governing the scheme, outlining its key requirements and provisions. In this article, we provide a detailed overview of CIS 340, its impact on businesses, and the types of businesses affected.

CIS 340 sets out the rules and regulations that govern the operation of the Construction Industry Scheme. It applies to contractors and subcontractors involved in construction work in the UK, including building, decorating, and civil engineering. Under CIS 340, contractors are required to deduct money from payments made to subcontractors and pass it on to HM Revenue and Customs (HMRC) as advance payments towards the subcontractor’s tax and National Insurance contributions.

The key requirements of CIS 340 include:

  • Registration: Contractors and subcontractors must register with HMRC for CIS before they can engage in construction work. Contractors are responsible for verifying the subcontractors they work with and ensuring they are registered with HMRC.
  • Deductions: Contractors are required to deduct money from payments made to subcontractors at the following rates:
    • 20% for subcontractors who are registered for CIS.
    • 30% for subcontractors who are not registered for CIS.
  • Monthly Returns: Contractors are required to submit monthly returns to HMRC, detailing the payments made to subcontractors and the deductions made. This ensures that HMRC can track the tax and National Insurance contributions paid by subcontractors.
  • Record-Keeping: Contractors and subcontractors are required to keep detailed records of all transactions related to CIS, including invoices, receipts, and payment records. This is necessary for compliance purposes and to provide evidence to HMRC if required.

CIS 340 was most recently updated on the 8th of March 2024 and applies to the United Kingdom.

cis 340

Does CIS 340 affect my business?

CIS 340 has a significant impact on businesses operating in the construction industry. Some of the key effects include:

  • Compliance Costs: Businesses must invest time and resources to ensure compliance with CIS regulations, including registration, verification, and record-keeping requirements.
  • Cash Flow: The requirement to deduct money from payments to subcontractors can impact cash flow for both contractors and subcontractors, as they may need to wait for reimbursement from HMRC.
  • Penalties for Non-Compliance: Failure to comply with CIS regulations can result in penalties from HMRC, including fines and interest on unpaid tax.

Businesses operating in the construction industry must ensure compliance with CIS 340 to avoid penalties and maintain good standing with HMRC.

Do I need CIS 340 in my ISO Compliance Register?

CIS 340 primarily affects businesses involved in construction work in the UK. This includes:

  • Contractors: Businesses that engage subcontractors to carry out construction work are classified as contractors under CIS 340 and must comply with its regulations.
  • Subcontractors: Businesses that carry out construction work for contractors are classified as subcontractors and are subject to CIS deductions on their payments.
  • Construction Businesses: Any business involved in construction work, including building, decorating, and civil engineering, is likely to be affected by CIS 340.

If your business is categorised above then you will need to include CIS 340 in your ISO Compliance Register.

Legislation related to CIS 340

Legislation related to CIS 340 include:

  • Finance Act 2004
  • Finance Act 2024
  • The Income Tax (Construction Industry Scheme) Regulations 2005

More information

Visit the  CIS 340 article on the website.